The Bill seeks to increase the percentage of the appraised value or selling price of a property that can be insured under the Mortgage Insurance Act from 90 per cent to 97 per cent.
Legal Officer /Company Secretary of the JMB, Donna Samuels-Stone, explained to JIS News that typically, deposits are now between 10 per cent and 15 per cent of the sale price or the appraised value of a property, in addition to the closing cost. With the amendment, the mortgagees have the flexibility of offering a three per cent equity input on behalf of the purchaser.
“It is important to bear in mind, however, that you have to pay transfer tax and registration fee, which amount to approximately 9.5 percent, with transfer tax being five per cent; stamp duty, four per cent; and 0.5 per cent registration fee,” she pointed out at a recent JIS Think Tank.
“If you qualify for a 97 per cent mortgage and can pay the three per cent deposit, you will have to find an additional 6.5 percent to cover the other incidentals. What we are recommending is bridge financing that will facilitate the payment of the difference because within another two months, the commitment from the institution for the 97 per cent would have come in, and the borrower would be able to pay back the amount borrowed,” she further explained.
The Mortgage Indemnity Insurance covers any approved mortgage lender that accedes to the Act.
The insurance allows the mortgage institution to lend a higher portion of the appraised value of a property. A mortgage company is usually comfortable with lending up to about 70 per cent of the value of a property, as anything beyond that increases the risk profile.
“As it is now, that portion is 90 per cent. The upper portion, between 70 per cent and 90 per cent, is what is covered, so that if there is a default, the extra amount is covered. With the amendment, the upper limit has been pushed up to 97 per cent, which allows the JMB to insure an upper portion of the loan amount up to 97 per cent,” Mrs. Samuels-Stone pointed out.
She hailed the passage of the Act, noting that its impact on the real estate and mortgage markets “is likely to be tremendous.”
This, she said, as it will allow more persons to access larger mortgage amounts and will reduce the sum that persons have to find when purchasing a property.
She said it would also enable more persons to enter the mortgage market, who would otherwise not have been able to do so. This includes young people, who can afford the monthly payment but are unable to come up with a large deposit up front.
“We are really trying to get people into houses at a younger age so that they have a longer repayment period. It should also become a little more affordable because salary is expected to increase over time, which would make the mortgage payment less impactful,” Mrs. Samuels-Stone said.