Purchasing a Home? Start by Reducing Your Debt
Many Jamaicans have made resolutions and set goals for the New Year. For some, this means living a healthier lifestyle, purchasing their first car, or upgrading to a newer model.
For others, it means taking those necessary steps towards achieving their dream of owning a home.
If your goal for 2018 is to purchase real estate, Petal James, head of Mortgage Sales at JN Bank says there are several decisive steps you will need to take, to prepare yourself and make the process as simple and affordable as possible.
“The journey towards homeownership requires a lot of planning and preparation: as such, the key is to ensure that you make a solid plan, which can be carefully and wisely executed,” she advised.
Miss James noted that buying a house is a major investment that cannot be realistically achieved, “overnight”.
“It takes systematic planning and preparation; therefore, if 2018 is the year in which you plan to own a home, then chances are, you should have been putting several critical measures in place from at least a year or two years ago,” she advised.
The JN Bank Senior Manager said one of the first measures prospective home owners should begin to pursue is to reduce their existing personal debt(s).
“Prior to approving your mortgage, lenders need to be assured that your existing debt will not prevent you from making the monthly payments to finance your mortgage. One major factor that lenders consider greatly is your ability to make those payments. This is measured by assessing your debts against your monthly gross income,” Miss James explained.
She advised home buyers that in order to assure lenders that they can meet their monthly payments, they should establish a monthly budget, which will allow them to pay down their existing debts to a manageable level.
“If your debt-to-income ratio is close, to or higher than, 40 per cent, you may want to take steps to reduce it,” Miss James explained. "You may want to consider increasing your monthly debt payments. The additional payments will help to lower your overall debt quicker.”
“For example, if your gross monthly income is $150,000 and you have monthly debts (car loan, student loan and credit card) amounting to $60,000 already you are at 40 per cent. In this scenario, it would be wise to reduce one or two of these debts, in order to comfortably afford a mortgage. Additionally, persons may want to avoid taking on additional debt. Therefore, they should consider reducing the sums charged on their credit cards, and postpone applying for additional loans,” the JN Senior Manager advised.
Miss James also advised prospective homeowners to postpone large purchases. “This means you will be accessing less credit and save more of your income. More time to save means you are able to put away more money for your deposit on real estate; and other costs associated with purchasing a home,” she maintained.