Oran Hall | A second NHT loan
Published:Sunday | April 19, 2020 | 12:31 AM
ADVISORY COLUMN: PERSONAL FINANCIAL ADVISER
QUESTION: A friend of mine currently owns a house that was purchased using a National Housing Trust loan. She would like to sell it. Note: a number of renovations were done to it. Is it possible to sell it and still access an NHT loan?
– T. Henry
FINANCIAL ADVISER: It is possible for your friend to sell the house and get a loan from the National Housing Trust (NHT) to purchase or construct another house if several conditions are met, but your friend should not expect to be able to borrow the sum of $6.5 million, which is the maximum a qualified contributor can borrow to purchase or construct a house.
The conditions include the following: your friend would have to pay off any sum owed to the NHT; still be a contributor to the NHT; establish that ownership of the house has been transferred to somebody else, so your friend’s name would not be on the title and would no longer own a house; and, meet the minimum requirements established by the NHT to borrow from it.
A very important condition would be that your friend should have received the first benefit from the NHT at least 15 years ago: the facility under which such a benefit is given is the Fifteen-Plus Loan. The maximum benefit under this facility is $2.5 million. If, however, your friend is employed in the public sector, the qualifying period from the first benefit would be 10 years.
You should note that renovating or not renovating the house has no bearing at all on the eligibility of your friend to borrow from the Trust to purchase a house after selling the current house.
The process does not differ from that of the first loan, and the applicant would need to attend an interview. The prospective applicant needs to meet the basic requirements, including having identified the house to be purchased if the purpose of the loan is to purchase a house, agreed a purchase price, made at least a five per cent deposit, earn an income enough to repay the loan, be under the age of 65. Additionally, previous beneficiaries who lost their homes because they defaulted on their NHT loans are not eligible, and the funds cannot be used to buy a NHT scheme unit.
The Fifteen-Plus loan may also be used to repair or improve a residential property. For example, the funds may be used for tiling, installing cupboards, fencing, and roofing, but not for enhancing external features of the property such as landscaping.
Under the Fifteen-Plus Loan facility, public-sector employees may apply for a second loan to repair or expand their house (mortgage property or another residential property owned and occupied); buy and install a solar-energy system, including solar panels; or buy and install hurricane shutters.
In addition, public-sector employees who no longer own a house and are seeking a second opportunity at home ownership may also use this loan to acquire another residential property. In this case:
● The funds may not be used to acquire an NHT Scheme benefit (house or serviced lot);
● The applicant must demonstrate that he or she is no longer a homeowner;
● The applicant must not have lost the previous property owned due to default on his/her NHT mortgage;
● The applicant must satisfy the minimum loan requirements, that is, all eligibility or affordability criteria.
The NHT allows a maximum of two persons to apply for the Fifteen-Plus Loan and for the Public Sector Workers Loan as long as the loan will be used for the same property.
There are people, unlike your friend, who own a house but have never received a benefit from the NHT. They can apply for a Homeowners Loan, which can be used to assist in acquiring an NHT scheme benefit but not as the primary applicant; assist with the purchase of another property; repair or improve their house; or to purchase and install a solar panel.
Through the Fifteen-Plus Loan, qualified NHT contributors can borrow as a single applicant or may co-apply with one other qualified NHT contributor to access a higher loan limit. If need be, and they can afford to borrow more money, they may seek additional funds from another lending institution that is willing to enter into a joint-finance mortgage with the NHT.
Oran A. Hall, principal author of The Handbook of Personal Financial Planning, offers personal financial planning advice and counsel.