Oran Hall | Divorced and seeking second mortgage
ADVISORY COLUMN: PERSONAL FINANCIAL ADVISER
QUESTION: I lost my house in a divorce settlement. I bought it with a joint mortgage from the NHT. Am I able to get another mortgage to assist me to acquire a new home? – Sanderson
FINANCIAL ADVISER: It is possible to get another National Housing Trust, NHT, mortgage if you got the previous mortgage at least 15 years ago and are employed in the private sector or self-employed; or at least 10 years if you are employed in the public sector.
The Fifteen-Plus Loan is for contributors who previously received an NHT loan at least 15 years ago and now wish to repair the property that they bought at the time – or some other house that they now own and occupy – or if they no longer own a house and are seeking a second opportunity at home ownership.
Restrictions apply if the loan is to be used to purchase or construct a residential property: the funds may not be used to acquire an NHT scheme benefit, whether a house or serviced lot; the applicant must demonstrate that he or she is not the owner of a residential property; and the applicant must not have lost the previous property owned due to default on his or her NHT mortgage.
Using the Fifteen-Plus Loan, a contributor can borrow as a single applicant or may co-apply with one other qualified NHT contributor to access a higher loan limit to purchase property on the open market. If you qualify for the loan, the most you would be able to borrow is $2.5 million.
If you are an employee, you should write to the customer service manager requesting approval and submit a valid identification card, your National Insurance Scheme or NIS card, your Taxpayer Registration Number or TRN card, and three recent pay slips. If the application is approved, you will be required to attend an interview.
If you are self-employed, you should first visit the compliance department and request a mortgage memo, which gives a summary of your activity and includes your NHT payments, when they were made, how long you have been making contributions and the income on which you made the contributions. You should submit this information with your letter of application.
There is another case – quite unlike yours – in which a contributor who has received a benefit can get another benefit. This is a case in which a contributor sells a property bought with a loan from the NHT and desires to buy another property. The contributor would need to write to the NHT before selling the property seeking special permission to transfer the benefit to the house to be purchased.
The contributor would not really be getting a new benefit but would get a loan of the same amount as the sum needed to eliminate the principal portion of the debt from the existing benefit.
This would be used to cancel the existing debt, but would count as the NHT's contribution to the new purchase, so the contributor would get no new funds. If, for example, the original mortgage was for $4.5 million and $2 million was repaid to the NHT, the amount required to close with the NHT would be $2.5 million.
The NHT would give a loan of $2.5 million on the same terms as the original loan. The contributor would pay the same rate of interest and would be required to pay off the loan at the time the old loan was scheduled to be paid off. If then, the term of the original loan was 25 years, but it is now seven years since the first loan, the contributor would be required to pay off the new amount in 18 years.
Because $2.5 million of the money in the current house would have come from the NHT and is to be transferred to the new house, when the current house is eventually sold, that sum should go towards the purchase of the new house.
If you qualify for the Fifteen-Plus Loan, you need to bear in mind that you will only qualify for $2.5 million and that there are significant expenses associated with purchasing a house.
Oran A. Hall, the principal author of ‘The Handbook of Personal Financial Planning’, offers personal financial planning advice and counsel.