Purchasing a house in Jamaica – The preparation, process, fees and tips

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So you made the decision to make the first step towards homeownership, now what?? If this is your first home then you have a million and one questions and not sure where to start. Trust me! I know what that feels like because we had loads of questions and used multiple sources to gather all the information needed at different stages in the process since. Below I will outline some lessons learnt from our experience with purchasing a house in Jamaica.

I will try to provide as much information on the process to help you start this very bumpy and consuming journey.  There’s so much to talk about so I will break it down into the following sections:

• Preparing for Home Ownership in Jamaica
• Mortgage Options
• Getting a mortgage in Jamaica
• Closing Cost & Associated Fees
• Additional Tips

Preparing for Home Ownership in Jamaica

When preparing to purchase a house in Jamaica there are a few things we did before we got to the stage of finding and purchasing our first home. This was our process and it worked for us however, the tips below are by no means hard and fast steps for you to follow on your journey to homeownership. Some of the steps outlined in this section are suggestions while others are just necessary for a successful outcome.

Start saving towards your deposit and closing costs.

Now there are ways to save and there are ways to make your money work for you. I am not a financial advisor and would not suggest that anyway is better than another since that depends on your risk appetite. Our approach to building funds was to invest in stocks and unit trusts. We found that we could get more returns on our investment over a shorter time period by investing instead of saving. There are many institutions in Jamaica with various offers and accounts to help you invest smartly and reach your financial goals.

Look at properties early

This will sound premature however, we started to explore properties on the open market, long before we were ready to purchase. Property stalking as we love to call it will help you to identify areas of interest, property types you may be interested in and most importantly give you an idea of what was available on the market and the cost of various property types. If you can visit multiple open houses and viewings, looking at both new builds and pre-owned. I think this step is very important to inform your decisions and help you to identify where you want to live and the type of property which would be ideal for your first home.

Ensure you have a budget in mind.

We had a good idea of what the property costs were in our desired areas after doing property shopping/stalking. At the time we knew we would have to buy pre-owned since all the new builds in our area were more than we could afford. We were willing to purchase a home that needed some work and remodel it to make it ours. Explore your options and preferences to arrive at a reasonable and realistic budget.

Get pre-approved.

The best way to know exactly how much you can afford is to get pre-approved by a financial institution of your choice. There are various online tools that you can use to get an idea of how much you may be approved to get for a mortgage.

To get pre-approved the following documents may be required. These may vary based on the institution.

• Last 3 months salary slips
• TRN & I.D.
• Last 3 month’s bank statement
• Proof of address
• Evidence of your contribution and closing cost 
• Credit Report (requested by bank, cost born by you)

Identify your Attorney

Now there is some controversy about whether you need an attorney or not. Listen, this is not a lunch meal purchase, it’s one of the most significant purchases you will ever make. That being said you need an attorney, so ensure you identify your attorney early. Your attorney is very crucial at almost every stage in the process and protects your interest. They will review all the essential documents before you sign them to ensure that the terms of the agreements are satisfactory and favourable.

Mortgage Options

Most first time owners will not be able to purchase their home with cash, and so it is important to explore your financing options when purchasing a house in Jamaica. In this section, I will outline 3 of the most used options for financing you first home.

NHT Only

If you have never owned a home before or your name is not on a home title then you may be eligible for a full benefit NHT loan, which gives you $6.5M JMD towards your first home. You may also be eligible to purchase an NHT developed home or property. You can join NHT benefits with a maximum of two persons towards the purchase of a property. The current interest rates are between 0-4% with a maximum borrow of $6.5M JMD per person. You can get more information on eligibility and NHT loan types from their website.

Joint Finance Mortgage

A Joint Finance Mortgage allows you to access additional funds in excess of the NHT benefit. Why do you need additional funds?? Well, let’s say you find your dream home. It’s within your budget however the selling price is more than your NHT benefit. You will need more funds to cover the mortgage and would need to get a joint mortgage from an approved NHT mortgage partner. You will be able to apply for one mortgage through the financial institution and they would handle the entire process including joining your NHT benefit. Find out more about the institutions that are apart of this agreement.

Bank Mortgage

With this type of financing, you can go directly to the financial institution of your choice to get a mortgage. This option is most suitable for persons who previously used their NHT benefit or persons who are not eligible for an NHT loan.

Getting a Mortgage in Jamaica

Now for the somewhat exciting part. You are now at the stage where you found the house you want, it is within your approved amount and you are ready to seal the deal. Well, this is where “the process” starts. There is no way to compound “the process” or say it in a paragraph. The process to purchase a home is no easy feat, however many have successfully done it before you so we know it is very much possible. I will explain the process from a first-time buyer perspective so you know exactly what you can expect. Processes may vary a bit based on the financial institution’s internal processes however, they generally follow a similar framework.

Make an Offer

Enough rambling from me, you are ready to purchase a house in Jamaica. Your next move is to make a formal offer whether directly to the seller or to the realtor, depending on how you found your home. You may need to provide basic information as well as a copy of your pre-approved letter along with your offer. When your offer is accepted by the seller, then the sellers attorney will prepare a sales agreement and submit it to your attorney.

Sign the Sales Agreement and Pay your Deposit

Your attorney is very crucial at this stage in the process. They will ensure the sales agreement is in your best interest and there are no hidden clauses that may surprise you later in the process. Ensure that you have also reviewed the agreement, and once you and your attorney are comfortable you can proceed to sign the sales agreement and return it to the vendor’s attorney along with your deposit. You will also be required to pay 50% of the cost to prepare the sales agreement +GCT. The vendor will also sign the sales agreement and return it with proof that you have paid your deposit.

Submit your documents to the bank 

Its time to submit all your documents to the bank, as soon as you get the original copy of the executed sales agreement along with the receipt for your deposit. At this stage, you will need to submit the following documents; signed sales agreement, receipt of the deposit, surveyor report, valuation, property tax certificate, payslips, job letter and possibly bank statements. Most banks will request a valuation from their list of approved evaluators however, you will be responsible for the cost of the report. These documents may vary depending on the financial institution and their requirements.

What’s going on in the background?

You will go through a period where nothing seems to be happening. However, there is plenty going on in the background. The bank/financial institution is processing your loan and vetting all the documents submitted. While the vendor’s attorney is submitting the agreement for sale to the stamp office for assessment. On assessment, the stamp duty and transfer taxes will be paid by the vendor.

Commitment Letter

Your financial institution will provide you with a Letter of Commitment as soon as your loan is approved. This could take up to 45 days. You will then be required to sign the Mortgage Instrument. The bank will then issue a letter of undertaking, which is their written commitment to fulfil the payment to the vendor. These documents will be submitted to the vendor’s attorney.

Transfer and Registration

Both vendor and purchaser will sign the transfer document, and it will be submitted for cross stamping. The vendor’s attorney submits registrable transfer, title, reg fee to your financial institution. The bank will submit these documents to the titles office for registration along with Mortgage Instrument.

Some banks will disburse the loan on receipt of the documents, however, others will wait until the registration is complete.

Congrats, you’re officially a home owner

The sale is considered closed, once the disbursement is complete. You will now get the keys to your new home along with the Letters of Possession from the vendor’s attorney.

Closing Cost and Associated Fees

This section is where everybody stumbles a bit; closing costs and associated fees. It is important to have an estimate of how much closing costs you will need to pay. Some of these fees are based on the cost of the property while others are a set amount.

Deposit  – For clarity, your deposit is not a closing cost. The deposit is your first instalment towards owning your home. Notwithstanding, I want to mention it here since you will need to be prepared to pay this cost very early in the process. The deposit is usually between 5% -10% of the cost of the property, depending on your agreement with the seller.

Bank Fees vary based on the institution of your choice. This can be as low as free to as high as 3% of the property cost. The bank will also charge stamp duty, registration and attorney’s fees for Mortgage Instrument.

Registration Fee – This is payable to the Registrar of Titles and is approximately 0.5%. Both the vendor and purchaser equally share these costs

Stamp Duty – This is a whopping $5000.00 JMD. Both the vendor and purchaser equally share these costs

Legal Fees – This is usually 2% – 3% +GCT; however, there are some attorneys who charge a flat rate when representing the buyer.

Additional attorney fees will include the cost to prepare the sales agreement and the letters of possession. Both the vendor and purchaser equally share these costs and the sums are payable to the vendor’s attorney.

Surveyors Report – This cost may vary, depending on the cost of the property. The cost of the report is calculated at 0.3% of the property cost +GCT. Travel charges may also apply.

Valuators Report – This cost may vary, depending on the cost of the property. The cost for this report is calculated at 0.2% – 0.3% of the property cost +GCT. Travel charges may also apply.

Peril Insurance – Insurance is important and once you are getting a mortgage you won’t be able to avoid this cost. The insurance company determines the rates which mean the cost will vary based on the company you chose and also the cost of the property. It’s always good to shop around and compare not just prices but limits of coverage.

Life Insurance – You may be required to purchase life insurance in the amount of the loan. This will ensure that your loan is cleared in the event you die before payments are complete. The bank will offer this coverage however, you may have the option of shopping around for your own insurance. It’s a good idea to explore your options with a financial advisor to be sure you are making financially sound decisions where insurance is concerned. Also, be sure to discuss this with your mortgagee early so you are aware of your options.

Credit Report – Financial Institutions usually require a credit report once you apply for a loan facility. The fee is usually paid to the bank when you begin the pre-approval process.

Additional Tips

Get pre-approved.

The best way to know exactly how much you can afford is to get pre-approved by a financial institution of your choice. There are various online tools that you can use to get an idea of how much you may be approved to get for a mortgage.

To get pre-approved the following documents may be required. These may vary based on the institution.

• Last 3 months salary slips
• TRN & I.D.
• Last 3 month’s bank statement
• Proof of address
• Evidence of your contribution and closing cost 
• Credit Report (requested by bank, cost born by you)

NHT Contribution Refund Towards Deposit Loan (CRTD)

NHT provides this loan to first time home owners to help with their closing costs. The CRTD allows NHT contributors to borrow up to 100% of their available contributions, which are not yet due for refund, to use towards the deposit or closing cost.

Valuation

A valuation will clearly outline the market value of the property. The finance company will be guided by the valuation when issuing a loan. If you have the option to get a valuation done prior to making an offer on the property, you should. This will ensure that you are aware of the market value and guide your purchase decision.

Consider a fixer

While house hunting you can consider buying a property that needs a little work. Older, well-maintained properties can be a very good investment. They also come with perks like being larger than a newly built property and having lower maintenance fees. This will allow you to get a more affordable property that you can renovate and make your own over time. Ensure that you have a trusted contractor walk through the property with you to identify any possible issues. You also have the option of getting the property inspected by a property inspector.

Use a Real Estate Agent

A Real Estate Agent is a professional who knows all the ins and outs of the homes on the market in your area. Using an agent has many advantages like giving you access to multiple listings in your preferred area and expert advice of the best prices in the area. Your agent can also assist with negotiating the final price of the property and assist you with the initial paperwork when submitting your offer.

Closing

That was a mouthful huh? However, now you have a better idea of how you can go about purchasing a house in Jamaica, plus the gains of owning your own home will all be worth it in the end.

Comment below to let me know if this blog was helpful in your process of becoming a homeowner and share it with someone else who needs this information.

You can also check out my other posts on home improvements and gardening.

Until next time. Happy house hunting!