Your NHT Benefit – Make it Work For You!

Intro

What is a NHT Benefit and How Can It Help You To Own a Home?

As someone who has benefited from a NHT Loan I thought I would share some of the benefits of using the NHT especially for those who have the benefit and may not know about it! I don’t work for or with the NHT so please check with them for the latest updates on the benefits they provide. The information below is from my own research. 

Accessing Your NHT Benefit

If your employer deducts taxes from your income, then they should be making a contribution to the National Housing Trust (NHT) on your behalf.  2% of your Gross Income should be paid out of your salary and 3% of your gross income should be paid by your employer on your behalf[1].

Related: Check out my Net Pay Calculator here: https://bit.ly/2ZSLkX9

Paying these deductions allows you to benefit from purchasing a home through the NHT, or partially financing the purchase of a home with a lower interest rate. Check your pay statement to see if there is a deduction for the National Housing Trust Included. If you are contributing, then you should be able to access the benefits. If you are not, there are still ways to access benefits by making voluntary contributions. Persons who do not have an employer who makes deductions for them (e.g. household workers, self-employed persons etc.) can make the contributions themselves so that they can access the benefit at a later point in time.

What is the Benefit of using NHT?

The NHT website current indicates that the Housing Trust offers loans at up to $5.5 million for an individual ($11 Million for joint owners), but a policy change was announced by the Prime Minister in his Contribution to the Budget Debate in March 2019, that they were seeking to increase this limit to $6.5 Million. The interest rate was also lowered from 6% to 5% for persons at the higher income levels and by 1% across all income levels. See the table in the image below summarizing the changes in the interest rate for NHT borrowers and who is qualified to access rates as low as 0%!

  Excerpt from the Contribution to the Budget Debate given by The Prime Minister – Andrew Holness on changes to NHT Benefits.

Joint Financing Mortgages

Did you know that if you have a NHT Benefit you can apply for a mortgage with them by visiting JUST your financial institution? The Joint Financing Mortgage Programme that is facilitated by the NHT through partnerships with JN Bank, VMBS and other mortgage lenders, allows customers to apply for their NHT loan through the Bank or Building Society. Why would you want to do this? Remember the NHT lends up to $6.5 Million. If the home you wish to purchase exceeds this amount e.g. $10M you will need to access the additional funds through a financial institution. The difference between the amount NHT will lend and the cost of the house will be lent to you at the market rate of around 8.5%.

On their website, the NHT refers to the Bank/Building Society as a Participating Institution (PI) and indicates that they are responsible for “managing all functions of that loan and so mortgage payments would be made directly to the PI and the PI would in turn service the NHT portion”. What that means is that you can do the entire loan process by visiting one location (the PI) and you make all the payments to just the PI as well. The PI and the NHT will arrange repayment on the back end, but all you need to know is that your mortgage process is a lot easier through this arrangement. Prior to the Joint Financing arrangement, borrowers would have to visit both institutions.

Benefits of the NHT

If you read my article The First Time Home Owners Guide you would have seen where I indicated that the lower the interest rate, the less you will pay. Well paying a rate of 5% vs the market rate of 8.5% will mean you will pay a lot less in interest over the life of the loan. I mean A LOT. See the example I’ve given below for a loan of $9M with and without NHT.

The difference in the monthly payment on a loan of $9M, with all other variables kept the same is $15,086 dollars. Over the life of the loan, you will be paying $5.43 Million more in interest WITHOUT the NHT Benefit.  

Download this Mortgage Calculator to figure out how much your monthly payment will be if you get a mortgage with or without the NHT.

Announced Initiatives of the NHT – Inter generational Mortgage Programme

In the Budget Debate, the Prime Minister also announced the introduction of an inter-generational mortgage. By allowing multiple generations to pay for the loan, a child or younger sibling can continue with a mortgage obligation, subject to affordability, when the older mortgager retires or dies.

Under this programme:

• The loan will be scheduled over a 60-year period.
• The beneficiary’s loan with the NHT will be scheduled to retirement and will include the portion of the costs to be covered during the period from the date of the loan to retirement e.g. if the beneficiary has 20 years to retirement, only 20/60 or 1/3 of the cost of the solution will be factored into the required payment;

An heir must be identified at the time of application, but options are available for persons who cannot identify an heir including converting to a lease, paying off remaining balance, scheduling for 10 additional years or forfeiture. This could be something to consider, but as far as I am aware, they are still trying to figure out the operations and legal implications of instituting this kind of mortgage.

So in summary, one of the first things you should consider in purchasing a home is if you qualify for a NHT benefit and if you will need to borrow in excess of the maximum amount NHT will lend.

 [1] Tax Administration of Jamaica – https://www.jamaicatax.gov.jm/documents/10181/106865/payroll_and_contribution_rates_employers.pdf/4ddb3ffd-597b-4fa4-a17c-bde7968ac738