Oran Hall | Building a home with NHT financing

QUESTION: I bought a small plot of land from someone, and I need some help to access a loan from the National Housing Trust to build. I have the document from the bank that shows that I paid the person the money for the land. I have not got a formal receipt from the person and have bought four tons of steel and blocks to start building on the property. But I need help to go forward. I do not know the next move to make. Please help me.

– Don

FINANCIAL ADVISER: It seems to me that you have charted a difficult course in your journey to home ownership, and I cannot promise you that I can give you the kind of news you are expecting as you seem to have made some blunders in the handling of the matter.

You mentioned that you bought a plot of land but did not get a formal receipt from the vendor but that you have the document from the bank that shows that you paid the vendor. I am not quite clear on that. Was there no legal input, no sales agreement?

I am concerned about the fact that you do not have a registered title for the property because the National Housing Trust (NHT) requires that contributors borrowing to build should have a registered title for the land on which they plan to build.

What are your chances of getting the registered title for the property? How certain are you that you can get it when the vendor has not even given you a formal receipt for the money you have paid? Is there even a registered title for the property?

The NHT needs the registered title because it needs to register a lien on it as it is really being used as collateral for the loan. Can you say you own the land if you cannot present the registered title to establish your claim?

There is one situation in which the NHT lends against property not owned by the borrower – the case in which the owner gives written permission to the borrower to build on the land. In such a case, the owner of the property has to attend the loan interview with the borrower and sign the relevant documents giving the borrower permission to build on the land.

A property owner older than 70 is required to establish being of a sound mind and having the capacity to make such a decision willingly by presenting a medical certificate attesting to that.

In such a case also, the NHT must satisfy itself that more than one building can be legally constructed on the property. Additionally, it does not lend money to build on leased land.

I am trying to understand why you have moved with such speed to secure building material – to protect yourself against future price increases as some people do or to secure the material as money comes into your hands?

Let us say that you are able to get the registered title from the vendor soon, assuming there are no hiccups in the process, do you meet the requirements for borrowing from the NHT? Are you contributing to the NHT? Have you made at least 52 weekly contributions, 13 of which should be made during the 26 weeks immediately prior to making the application for the loan? Are you able to account for your contributions and have paid up, with interest, any outstanding contributions due in the last three years?

Bear in mind also that generally speaking, people who have previously received a loan from the NHT do not qualify for the Build on Own Land Loan and that securing a loan is contingent on your ability to make the monthly mortgage payments.

Let us say you are able to address the issues, and the NHT agrees to lend, consider this: if the cost to construct the unit is more than the amount being borrowed from it, you must use your own funds to cover the difference before it advances the loan. At the same time, if you need and can afford to borrow more money, you may seek additional funds from another lending institution that is willing to enter into a joint finance mortgage with the NHT.

It is very important to plan well. Having committed yourself to build, and having started to secure building materials, you are now thinking of how to get a loan to build although you have not settled the ownership of the land you want to build on. You need to secure the registered title before you can move on.

- Oran A. Hall, principal author of ‘The Handbook of Personal Financial Planning’, offers personal financial planning advice and counsel.finviser.jm@gmail.com