Can I use my father's NHT benefit?

Question: Can you kindly advise me on the following situations?

I am 31, married, but have no children. My father and I have been discussing the possible purchase of a lot of land for approximately J$1.4 million. The plan is to use his $800,000 benefit from the NHT at two per cent interest.

I plan to put the remaining $600,000 cash but don't know if that is a wise move. I would be paying the monthly NHT payment. From the discussion with my dad, he stated that he would love to have the land without acknowledging that I would be the major shareholder.

The fact that it is his benefit complicates things for me because I don't know how I would work out his share and, if it works out I know his share would be minimal, which would probably leave him feeling cheated.

Secondly, my parents and I are not having a good relationship at this time. It is of concern to me because it could end up in a legal fight. What is your suggestion?

The second issue is this. I have US$60,000 in my possession. How would you invest it?

- Rick

PFA: If I understand you well, you want to buy a lot of land, primarily for yourself, with your father's NHT benefit. The scenario you have presented seems complicated and potentially contentious, as you have acknowledged.

Let us begin with the current benefits for persons 55 years of age and older. Beneficiaries are required to be younger than 65, be gainfully employed, and be contributors to the National Housing Trust for a minimum of 10 years.

The rate of two per cent no longer applies. The rate was increased to that applicable to the standard rate for persons in the respective salary bands. The rate applicable to new mortgagors over 55, effective May 1, 2010, is two per cent points less than that of persons in the same salary band as the applicant. The rates are listed in the table.

If your father now owns a home, he would qualify for a loan of $1.5m to purchase a lot. If he does not own a home, he would qualify for the same benefit but, subject to affordability, he could qualify for an additional $3m for construction.

Since you would have a legal interest in the land, your name may be registered on the title. That would not hinder your father from accessing a loan from the NHT, but his name would have to be registered on the title.

You have stated that you would pay the monthly mortgage to the NHT. Generally, the Trust requires that payment be by salary deduction, unless the employer is not willing to facilitate the arrangement. It will accept over-the-counter payment, however, if the beneficiary is self-employed.

While you and your father are free to decide matters related to the ownership of the land, I am trying to understand how you would see yourself as the major 'shareholder' with your father's share being "minimal". (The word shareholder relates to ownership interest in a corporation so it would not apply in this case.)

You have not said if you are a contributor to the Trust. If you are, and can meet the requirements of the NHT, I suggest you make your own loan application. Why would you want to cause further problems between your parents and yourself? Do what you can to mend the fence, rather than risk a lifelong alienation from them.

You have asked how I would invest your foreign currency. I am not in the business of investing people's money, but there are certain issues that an authorised person investing your funds for you would have to settle - the level of risk you are capable of taking, the composition of your portfolio, your objectives and time horizon.

Land is a good asset to have. It is a good hedge against inflation. It is often a source, though, of much contention, especially in families. If you can, buy the land, but avoid the fuss.

Oran A. Hall is principal author of 'The Handbook of Personal Financial Planning'. For free advice on personal financial-planning matters, e-mail finviser.jm@gmail.com.

Income band Rate (Mortgagors Standard rate

(per week) 55 & over)

$4,070-$7,500.99 1% 1%

$7,501-$10,000.99 1% 3%

$10,001-$20,000.99 3% 5%

$20,001 & over 5% 7%