Owning a home is part of the dream of many…and getting a mortgage, whether to buy or to build, is just one of the steps to getting there.
But it is still difficult to buy a home in these pandemic times. Even more so, it is tough to get a mortgage when house and land prices seem to be on the rise. Is it your modest income, debt servicing ratio or the high prices for homes or land? Or is it that the bit set aside for a down payment is not enough, or maybe you need someone else’s income or credit history to bolster your own and help you get into a home that suits your needs.
Whatever the reason, taking out a mortgage is most likely the biggest and most important financial commitment you will ever make. And the good news is, there is a lot you can do to improve your chances of getting a mortgage. If you find a co-borrower, buying house or land could be much easier, here’s why;
A co-borrower is an additional borrower on a mortgage. Importantly, both the borrower and the co-borrower can have ownership of the property and are responsible for repaying the mortgage.
Co-borrowing is a suitable option when both the borrower and co-borrower stand to directly benefit from the loan, and where both parties intend to make payments.
A co-borrower applies for the loan with the borrower, and their total income usually helps to boost the borrower’s eligibility. The reality is both borrowers share the direct benefit of the loan while also sharing responsibility for repayment.
With a co-borrower, the borrower can qualify for a higher loan amount, as it may add income and lower the overall debt servicing ratio. The lender, or banker, considers two incomes, instead of one. If one experiences a loss of income though, the other person in on the hook. Both must be confident that they can fulfill their end of the bargain.
The co-borrower is tied to payments and is in it for the long haul. So if separation occurs, or in the event of a passing, payment are still split evenly. The lender or bank can demand repayment of the full loan amount from either party once the loan is approved.
If you are lucky, and you have a mother or father or both who are willing and able to help, take them up on their offer. They can actually use the equity on their home to help finance the purchase too.
Can you imagine driving up to a home that, once upon a time, was just a mere design that lived somewhere in your head? Turning your dream-home vision into a concrete reality, would be nothing short of a monumental accomplishment! Most people who have chosen to build their own homes, describe the end result as one which fills them with profound and tremendous pride. Whether you wish to display your unique style, or you are a purist when it comes to specific types of materials and fixtures, going the route of home construction may be the best bet for you!
Now, of course – though terrific – this is by no stretch of the imagination, an easy feat.
The process of home construction is often time-consuming, costly, and potentially complex. Yet, as with any arduous journey, the pay-off at the end is well worth it.
Ready to break ground? Great – read on!
1. Examine the Costs
Building your dream home is a delicate dance between what you really, REALLY want…and what you really, REALLY can afford. The surest way to determine this is by conducting an honest due diligence of your financial situation. Once this is complete, you will know whether you can start deep diving into the major questions in this arena, such as: What is the ballpark cost of building this home? What are the costs for materials, labour, contractors, interior fixtures, insurance, overruns; and if applicable: land, an architect etc.? Set aside quality time for compiling a detailed listing of all the foreseeable costs, to determine whether you are ready – or how soon you might be ready – to start building. Most importantly, find out how much you can afford to borrow by using our Mortgage Calculator.
2. Understand the Legal Requirements
Yes, we would all like to wave a magic wand and jump head-first into building, but before you do, bear in mind that there are regulations which, in many cases, will have to be adhered to prior to starting this entire process. For instance, home construction is often bound by Town and Country guidelines; and stamp duties may be incurred. You should consult the Ministry of Finance’s guidance on the stamp duty payment. We’ve compiled a list handy guide to all the legal documents you need when applying for your home construction mortgage.
3. Get Financing
Constructing your own home will definitely fill you with immense joy – however, the truth is whether buying or building, the entire process can be costly. Like many, you require a loan to make this possible. Trinidad and Tobago Mortgage Finance Company (TTMF) provides bridge and long-term financing terms, specifically for home builders. For instance, our interest rates are as low as 2%, and we lend up to 100% of the amount you need to build your home.Learn more about our mortgages for home construction here. The first step in the financing process is to get prequalified, so you know how much you can borrow, the interest rate, the down payment needed duration of the loan.
4. Select the right contractor – and Be in the Know
Your goal at this juncture is to find a contractor who, on the one hand, will oversee the construction of your perfect home, by doing quality work and using durable materials… whilst on the other hand, is someone who is honest, reliable and affordable. For this reason, it is essential to take your time and research the background, work history etc. of the person(s) you hire. Trustworthy references, who can either vouch for (or warn against) a particular contractor, can be a huge help. It is also often advised that prior to hiring, you should obtain at least three (3) contractor bids: and from there, select your choice. Lastly, it is important that although the skill of good contractors lie in providing great construction work, it would be beneficial to educate yourself on the ins and outs of this entire process as much as possible. This knowledge not only empowers you to make sensible decisions throughout – it also lowers the chance of being taken advantage of. For some jobs like painting, installing fixtures etc., you may be able to skip the contractor all together, if you have the skill. Here are some DIY ideas and other ways to cut down on labour costs.
5. Buy the right Building Materials
Once again, it is integral for you to be educated in this process. While the contractor generally takes responsibility for acquiring materials, you should also have some involvement, especially when it comes to cost comparisons. It is also advisable that you opt for quality, long-lasting materials, and home fixtures which are to your liking!
So, there you have it!
Don’t be dismayed by the enormity of the process of building your own home. These steps are here to assure you that this is all very possible! Whenever you feel overwhelmed, just circle back to that dream design, and keep it front and centre in your mind. Then, when you’re ready to take that leap, remember that you have some seasoned experts at TTMF who are ready help you!
We have all fantasised about buying our dream home, whether we’ve fallen for a multi-family two-storey home, driven past an idyllic country villa tucked away amid the trees, or visited a friend’s modern condo with endless facilities. Whatever the genesis, it sparked a desire that resonated within us to own a home.
Making that leap from mental goals to actively pursuing acquiring your dream home, may seem daunting to say the least. Many questions begin to pervade your mind such as: ‘How do I begin the home ownership process?’, ‘How much money would I need?’ and more so ‘Am I even eligible for a mortgage?’
A goal without a plan, is just a dream, so let’s develop a plan for homeownership.
1. Assess where you are right now – financially
Purchasing a home is one of the biggest financial investments you can make in your life and most people would require a mortgage to offset the cost. Home purchase mortgages generally cover between 90 – 100% of the property cost, you will need to have the difference in savings to make your down payment plus an additional 5% for closing costs. An excellent guide is through TTMF’s mortgage calculator which tells you, in under a minute, how much you can afford at this time and, if you have not done so yet, start saving.
2. Get Pre-qualified
When you’re ready to look for your perfect home, it makes sense that you have all the upfront information regarding your finances. This saves you time and opens the door for you to search for a home in a more focused, structured way. While mortgage calculators are excellent, to truly get an understanding of your financial standing, you will need to make an appointment to get pre-qualified. Your credit report is often taken into consideration when determining your eligibility to borrow. Improve your credit by working towards reducing debt and building healthy habits such as spending within your means and ensuring your loan payments and bills are made on time. From there, you can search for available properties, knowing precisely which options are within your price range.
3. Enlist an Expert to help in your Home Search
Whether or not you are finding the home-search process overwhelming or even time-consuming, it may be well worth your time and money to employ the services of a reputable real estate agent. They are in the know when it comes to shortlisting available homes for sale that are within your budget; they are familiar with the complexities of the home purchase process; and their experience has sharpened their detection skills to spot the faulty or missing elements on potential properties.
4. Be in the know yourself – with the Legal & Required Documents
Knowledge is power and it will help you to understand the process, particularly the documents which you will need to supply at all the various stages. When it comes to the legal phase, lenders and regulating bodies will need to ensure that the property you intend to purchase is unencumbered and ready for sale. This stage of the home ownership process can be rather onerous and lengthy. You can learn more here.
5. Apply for your Mortgage!
Now that you have found a home, you are now ready to submit your application for a mortgage loan. The first step of this process is to make an appointment – Book now. Review all required documents for appointments and ensure you have them ready: Key documentation will be required to support your application, such as a valid prequalification certificate, evidence of national identification (two forms); evidence of your savings and indebtedness; as well as the Title Deed or Lease for the property you intend to purchase. Be sure you have your Agreement of Sale. Your loan officer will guide you through the next steps and advise you of the parameters of the mortgage, such as its duration and interest amount and you will start paying your fees.
While purchasing your first home can be overwhelming, bear in mind that you are working towards a goal which marks an exciting and rewarding milestone in your life. As with anything that may appear overly complex, educating yourself is an integral part of the process.
If the plan does not work, change the plan, not the goal.
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