TRINIDAD BUILDING AND LOAN ASSOCIATION

- WHAT YOU SHOULD KNOW -

Purchasing a property is a major decision and long-term responsibility. It must be carefully and thoroughly planned before making a commitment to access the mortgage.

A mortgage is a long-term financing arrangement that allows you to enjoy the comfort of home ownership by making monthly mortgage instalments over a period of 15 to 30 years.

Most economies today are in a ‘financial meltdown mode’, as reflected by the reduction in their Gross Domestic Product - GDP.  The further revision of global output figures by the International Monetary Fund (IMF) and the Inter-American Development Bank (IADB) continues to reflect a downward spiral.  The financial crunch, which showed its head in 2007, resulted in a slowdown of world financial markets, including mortgage sales.  

This financial crisis, which has caused several large, long-standing financial institutions to either collapse or seek government/central bank support, has also been reflected in the commodities market.

What does financial meltdown have to do with prospective mortgagors or persons wanting to build or purchase their dream house?

The ability for you to service your mortgage instalment over a period of time depends on your ability to sustain your income and remain employable – both of which are related to the state of the economy.

Since a mortgage, more than likely, will be the largest debt incurred in a lifetime, this decision requires careful planning and answers to the following questions:

1. What part of the country would you like to live or where would you and your family like to spend a great portion of your life?

2. What size and type of house do you want and what is, or would be, the size of your family?

3. Do I have the down payment and/or capital to enter into a mortgage?

The up- front cash requirement for a mortgage transaction can range from 10% to 30%.

For instance, a property costing $800,000.00 would require a startup cash injection of $80,000.00 to $240,000.00.

4. Can I afford the monthly mortgage instalment or can I maintain the instalment over the life of the mortgage?

Your monthly mortgage instalment and your other long-term financial commitments should   not exceed 33% of your family’s total gross income.  For instance, a mortgage of $800,000.00 over 20 years at 9.0% would attract an instalment of $7,197.81 per month.  The questions you need to ask are: Can I afford this instalment now and in the future?  What if my income is reduced?  Do I have sufficient income to support this level of instalment?  Do I have a back-up plan?

5. Can I maintain the property?

Buying or building a house is an important achievement in the life of a family, but what is also important, is the ability to maintain the property in order to protect its value and keep it habitable.

The maintenance cost of a property is based on its size, location, design, use and number of people occupying the property.

6. Which institution would you go to for your mortgage?

There are a number of institutions that offer mortgage financing.  Mortgage requirements and the terms and conditions tend to be similar.  Would-be homeowners are advised to ‘shop around’ to select the institution that would satisfy their mortgage needs. 

7. Income sustainability.

The lender’s decision to grant a mortgage is primarily based on the applicant’s ability to repay the mortgage over the mortgage period.  In order to facilitate the mortgage process, applicants are advised to have all supporting documents to ascertain their income, especially that of other income. 

Having planned your mortgage needs and having dealt with the above issues, one must then meet the mortgage requirements before the application can be assessed. 

The mortgage process is the pathway one must follow when deciding to obtain a mortgage:

1. The mortgage planning process must be thoroughly evaluated as articulated above.

2. Ensure financing is available for your mortgage. 

Obtaining preliminary and/or tentative approval on the size of your mortgage is advisable before entering  into a Purchase Agreement. 

3. Obtain an official Purchase Agreement when you make your down payment.  It is advisable that an Attorney at Law prepares the Purchase Agreement. Your Attorney should also ensure that the person who is selling the property has title to do so. A Purchase Agreement would normally give the purchaser 90 to 120 days to close the transaction. 

4. Obtain all necessary up to-date current documents in support of the Mortgage Application. 

5. Visit your mortgage financing institution to complete the Mortgage Application and to be formally assessed for the mortgage. This step also involves completing a Personal Financial Statement (PFS) outlining  all your income, expenses, assets and liabilities.  As mentioned in (4) above, all supporting documents must be provided.

7. Once you agree to the Mortgage terms and conditions, the mortgage financing institution would then have the Deed of Mortgage prepared. This is the legal agreement between the financing institution and the mortgagor(s).  This will only be done after searches and statutory requirements are met.

8. The Deed of Conveyance, which is the conveying of the property from the seller to the purchaser (mortgagor), will then be prepared.

9. Both the Deed of Mortgage and Deed of Conveyance have to be registered.

10. Enjoy the comfort of your home by paying your mortgage installments on time.

The Trinidad Building and Loan Association (TBLA) has been in existence since 1891 and is the longest standing housing financing institution in the country. The Association is a Building Society that provides affordable mortgage and credit financing for people to own, renovate or improve on their property. In addition, the Association also offers a range of investment products and services to its shareholders, organisations and members of the public. The Association continues to be guided by an esteemed Board of Directors.

Nigel Matthew is the Chief Executive Officer and Secretary of the Board of the Trinidad Building and Loan Association.  Feedback and comments can be sent to: info@tblamortgages.com or at the TBLA’s office, #89 Queen Street, Port of Spain.  Telephone: 623-1501/4 Fax: 627-0675. Visit www.tblamortgages.com for the expanded version of this article.