Think back, if you can, to the first time you unfolded your payslip and saw all those deductions. Your pay has been hit and the dent is significant. National Housing Trust (NHT), Income Tax [Pay-As-You-Earn (PAYE)], National Insurance Scheme (NIS), and Education Tax are the four (4) main taxes that are deducted from your salary, once you are of age and of an income level.
Today, let us take a look at NHT. What is it? What is it for? How does it work? What does it mean for me?
NHT – The History and Purpose
Well, it is a government-implemented national social housing programme where the trustee (NHT) holds the contributions of both employers and employees to provide funds to approved applicants relating to housing. The National Housing Trust (NHT) was established in 1976 through an amendment to the National Insurance (NIS) Act of 1976. In 1979, the National Housing Trust Act was passed into law. The Trust is structured for first-time property owners and designed to help persons who would not be able to own a home through the banks, building societies or out of pocket. NHT lends money at low interest rates to Contributors who wish to build, buy, or improve their houses, or who wish to buy or build on lots. The NHT also develops housing schemes for sale to Contributors and provides low-cost financing to private developers.
From an accounting standpoint, it is a calculated percentage amount taken from your pay once you are employed. Once this is taken out by you (if you are self-employed) or by your employer, it should be turned over to the Trust (scheme), where you are then considered a contributor to the Trust. For context, note the employment age considered for the NHT is eighteen years (18), and continues to be applicable before retirement. This is important because it determines how many years you have to pay back the loan, or be qualified for, or entitled to a loan. Additionally, it determines the monthly amount paid. More years mean lower payments and less years means the opposite. The ‘scheme‘ here means that your contribution goes into a pool and is used to help (fund) other qualified contributors that desire a loan for property purchase or home improvements. The intent of the Trust is to assist a person without a home or house (property ownership) to do so with a lower interest rate and under conditions that other non-government financial institutions may not offer or be able to offer.
What does this mean to you?
You have just started working and you are not ready to buy a house; or you are up in age and will soon retire, with no savings close to buying a home; or in the middle, but you have school, child(ren), elderly, and ends cannot meet. It means you should still look into it and devise a plan of action. But it first means you should be in the know.
You can apply for a loan when you have contributed to the Trust for one (1) year, and you are ready to purchase a property and are qualified for that loan. Ready to purchase a property means you have looked at the real estate market, saved up some money for a deposit, for government charges, and for a lawyer to oversee the transaction. To be honest, you can never really know exactly what that amount will be (typically 20% of purchase price), so start saving and start anchoring your expectations. If you dream big, then it is best to start early and consider what they term as a starter home as your steppingstone to your dream home. However, there are other things to note before visiting an NHT office. You can write them down or memorise them to guide your conversation with an agent when you have made your appointment.
What is the maximum loan amount being offered by NHT?
Over the years the loan ceiling has changed in an attempt to keep up with:
- the growing demand for housing,
- the ravenous hunger of inflation set against the Trust’s ability to provide earnings on the contributors’ pool funds,
- the investment yield,
- the overall employed persons contributing (the employment rate),
- the number of employers in the economy,
- the number of beneficiaries honouring their mortgage payments and
- the tax compliance rate.
Some of those listed are variables that NHT has no control over, and some they do, like how they invest your contributions to earn money and to whom they give the loans. These two variables they have the most control over and can exercise measures to improve or correct decisions more readily. Now, the current loan limit is the main indicator to watch because this tells you what the housing market is like currently. The Trust never aligns with market prices, which means it is less than the market, which is why the scheme was created. If you understand the concept of a Partna Plan (Partner Plan) where funds are pooled to pay out to one person per draw and continue for all the persons in the scheme, the Trust in its simplest form functions similarly. It groups and helps where one cannot achieve on its own. So the limit in effect limits your options…but you do have options.
What is your personal limit or your personal qualified loan amount?
This is based on two (2) factors, your age, and your salary. You can take until the age of retirement to service (pay back) the loan (mortgage). Your salary is examined to determine if the amount (the loan payments + interest = mortgage) can be taken out of your salary and leave enough for you to still survive. You will still have to eat, pay bills, pay property taxes, pay other taxes, maintain yourself (and dependents, if any), and so on.
So let us create an example. If the loan limit is Five (5) Million dollars, and the market value for a two (2) bedroom, one (1) bathroom house with kitchen, in a middle-class neighbourhood is Nine (9) Million dollars on the open market, you would need to find out if you can afford to purchase. You visit NHT and they calculate that with an interest rate of 4%, you only qualify for three (3) Million dollars at your current salary and age.
Your options are to:
- Increase your salary
- Apply for an NHT scheme unit (Homes built by NHT to cater to the lower-income contributors)
- Purchase land to build
- Just purchase land
- Apply with another or other qualified contributors
- Purchase a home up for foreclosure or a fixer-upper home
- Use the NHT qualified amount with another financial institution (Bank, mortgage firm, building society, etc.)
- Not apply for the loan at all.
Just note that the interest rates can change, the loan limits can change. Therefore, it is always good to stay updated and check what benefits apply specifically for you (government worker, civil servant, entrepreneur, etc.).
Contribution Refund Towards Deposit (CRTD) Loan
The last option mentioned, not applying for the loan, is still a useful option because you are entitled to your contributions within twelve months after the seventh anniversary (7 years) of the end of the first contribution year to a refund equivalent to the contributions made during the first contribution year, together with any bonus awarded. This basically means that you can apply for your NHT contributions after year seven (7) of contributing. So, if you started working and contributing in 1980, at the end of 1987 (Jan 1, 1988), your 1980 contributions can be refunded to you, with interest. If you contributed for the entire seven (7) years, each year after, you could apply for the following years (1981,1982,1983, etc.).
If they go uncollected, they will be lumped and refunded when you do apply; or it can be lumped and be used to offset costs related to the purchase of property, should you run short or do not have the deposit to purchase. The refund is called a Contribution Refund Towards Deposit (CRTD). If you are financially savvy and patient, the lump sum could be taken and used to earn higher interest or be invested for when you are ready to purchase a property and need a deposit.
Other questions to consider when making your visit to the NHT office include:
- What is the rate of interest on the loan?
- Are there other options provided by the Trust to help lower-income contributors?
- How do I apply for NHT scheme units?
- Do I receive the full amount I am qualified for?
- How do I get 100% financing from NHT?
- What are all the ways I can use my (seven years) contributions towards a property purchase?
- When can I apply for home improvement loan?
- What disqualifies me for a loan?
- Can I work abroad and still contribute?
- What is joint tenancy?
- What is tenancy in common?
- What is property tax?
- What is property tax for?
- How many persons can pool together?
These questions and the former are just tips to guide and maybe simplify the process for you. I did not attempt to answer these questions mainly because they are questions specific to the individual or the answers to these questions will change over time.
Do yourself a favour – do your research and your due diligence (checking any information you receive by confirming with someone of authority on the matter). My advice to anyone who has a goal is to map out your route to it by weighing the pros and cons, visiting the institution bearing the options, and asking the right questions to the right people. Find out as much as you can from persons smarter than yourself and who have done what you wish to. Sounds easy? It is not. Many do not wish to share their experiences through fear, selfishness, ignorance, and privacy. Those who do get drowned out by noise, fanfare, current affairs, and distractions for an unsettled mind. Furthermore, when you lack the know-how it can cause fear and anxiety. Fear triggers paralysis, or fight or flight. Anxiety brings pressure, worry and panic. When you are in the know, the fear and anxiety can be better managed and it gives you the ability to avoid persons and things, waiting in the dark, to take advantage of your lack of knowledge.
For more information, you may visit the National Housing Trust’s website at https://www-2.nht.gov.jm/
