The Government of Jamaica is looking at instituting a deposit financing scheme to provide short-term loans for homebuyers who are unable to come up with the down payment required to purchase a home.
Making the disclosure at a recent Jamaica Information Service (JIS) Think Tank, Minister of Transport, Works and Housing, Dr. the Hon. Morais Guy, explained that the proposal is for beneficiaries to repay the loan over a three to five year period in addition to their mortgage payments to the National Housing Trust (NHT) or any of the private mortgage companies.
The proposed measure will reduce the burden of a high down payment, which is currently between 10 to 15 per cent, and closing costs.
“We are seeking funds currently to assist the smaller mortgage companies, primarily the credit unions, so that we can offer a home deposit financing, as even at the current 15 per cent or even if it goes to 5 per cent or 6 per cent, some persons still might not be able to find closing costs and deposit,” Dr. Guy argued.
The proposed deposit financing programme is part of initiatives by the Government to make home ownership easier for average Jamaicans.
In his contribution to the 2012/13 Sectoral Debate in July, Minister Guy mentioned plans to amend the Mortgage Insurance Act to increase the percentage of a property on which mortgage indemnity insurance can be provided.
The amendment, as advised by the Jamaica Mortgage Bank (JMB), would raise the percentage on the allowed value for financing from 90 per cent to 97 per cent.
“What this will basically mean is that we will be able to issue mortgages to primary mortgage holders up to the tune of 97 per cent,” Dr. Guy said at the JIS Think Tank.
He noted that the buyer will only be required to pay three per cent, in addition to the cost of transaction.
He lauded the work of the JMB, which falls under the Ministry, noting that the institution has been intensifying its reach in the secondary mortgage market over the past two years and this move has led to the lowering of mortgages from a high of 17 per cent to rates as low as 9.5 per cent.
Meanwhile, the Minister said that the amendments to the Rent Restriction Act should be finalised in the upcoming financial year. The draft has been sent to the Chief Parliamentary Counsel for review.
“We feel that the Act, in its current position, is not too friendly with the developers or home owners,” Dr. Guy stated.
He said that even though there has to be built-in protection for tenants, “we feel that there is the need to have some legislative changes to level the playing field to make it more encouraging (for) a person, who is in the market to rent houses, to be able to get a good return on his investment”.