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11. Thinking of Getting A Mortgage?
By Johnathan Johannes, Retail Banking Manager for
FirstCaribbean International Bank, St. Kitts
& Nevis
 |
The
question may intimidate many of us, as a lot of people
feel uncomfortable about getting a mortgage. Relax –
it is not as difficult or as complex as you may think.
Whether you are buying or building a new home, improving
your existing home, or wish to lower your current mortgage
payments, your banker will work out your ideal long-term
financing solution. Here are
some useful tips for homeowners to consider before approaching
a financial institution for mortgage finance. |
Buying/Building A New Home
For most of us this may represent the single largest
investment we may ever make, as such there are many factors
that we need to consider.
Know how much you can comfortably afford.
Here is a good rule to follow: your monthly mortgage repayment
should be no more than 40% of your personal or combined household
income. It would also be wise to visit with your banker before
you go “house hunting” or before you finalise
your house designs. Together you and your banker can quickly
work out the price range that you can afford. It is also advisable
to calculate in advance for mortgage related expenses such
as government taxes and other closing fees.
Try to delay other major purchases. Making major
purchases – like a new car or new furniture
– prior to buying property can put added strain on your
budget.
Location matters. Make sure the home you
choose is in a location that meets your needs e.g. within
access to schools, shopping, your place of work, transportation
routes.
Think carefully about what you need and want in a
home. Consider your current and future needs. Is
your family growing? Will you need extra rooms?
Avoid judging the book by its cover. Even
if the exterior looks attractive, make sure the home you choose
is in “liveable” condition. It is wise to have
it professionally inspected, and also to have a valuation
done so that you know you are not paying more than the property
is worth.
Check before… not after. This is especially
important when buying land. Ensure that electricity, water
and telephone services are available. If you are building,
check your contractor’s reputation. Ask for references
and check them. Also try to ascertain how much preparation
work needs to be done before construction begins. If you are
buying a house, talk to the neighbourhood residents. They
may well have good advice to offer.
Shop around for the best rates. This is
perhaps the most important and often overlooked element of
preparing to buy or build a home. A 1% difference in an interest
rate can make a world of difference:
An EC$130,000 home mortgage at a rate of
9.5% for 20 years can save
you EC$20,669, when compared to a rate of
10.5%.
It is in your best interest to check for the best rates.
Applying for your mortgage can be quick and easy. After considering
the previous points, your next step is to visit your banker
and talk with a representative who will show you how quick,
easy and hassle free applying for your mortgage can be.
When applying for your mortgage, it will certainly save time
if you have the following documents available:
1. Two forms of identification (e.g. driver’s license
and passport)
2. A letter from your employer
3. A property valuation
4. An agreement for sales (from the person from whom you are
purchasing the property
5. Construction estimates, approved construction plan and
a legally binding, fixed price contract between you and your
building contractor (if building or renovating property)
So there you have it. Armed with these tips, you can
now make informed decisions about the type of mortgage that
best suits your needs and pocket. Visit your banker today
and leave with a mortgage tailored to your needs.
This article was submitted as part of the ECCU
Financial and Economic Literacy Campaign coordinated by the
Eastern Caribbean Central Bank. The author can be contacted
at FirstCaribbean International Bank, (869)
466 2048 or via email johnathan.johannes@firstcaribbeanbank.com
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Thinking of Getting A Mortgage?