The real cost of homeownership

BY PAUL ALLEN
Observer Business Writer

Sunday, September 01, 2019

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Purchasing a home is one of the biggest monetary obligations anyone will have in their lifetime. Having said it several times in this space before, it is still curious to see just how many people are still unaware of the related expenses of getting their dream home (or even a starter house, if we're being realistic).

The down payment, processing fee, possible renovations and mortgage aside, the journey to and act of owning property has many costs, some unknown to the prospective buyer until they are in the midst of an already expensive process.

Once again, we enlisted the assistance of the professionals — Dawn Ruddock, realtor and broker associate, and realtor associate Lystra Sharp — at Coldwell Banker Jamaica Realty to help break down the true cost of homeownership.

A “safe” total to put aside when purchasing property is 15 to 20 per cent of the cost of the unit, said Sharp, who added, “you may require less depending on the amount of the deposit and the mortgage application costs”.

A comprehensive look at other expenses includes some previously mentioned, like the mortgage application cost, which includes attorney's fees, and the downpayment.. However, one must now contemplate added charges such as “the surveyor's identification report; valuation; sale agreement and letters of possession, which are both fixed costs shared with the seller; stamp duty; registration fee; and attorney's fee, which attracts a general consumption tax. Insurance should be purchased by the buyer after the title has been transferred (this is recommended); it is obligatory if getting a mortgage”, said Ruddock, who also shared “at this time in Jamaica, generally, realtor fees are paid by the seller, not the buyer”.

Before getting to this point, one may want to consider if they are truly ready for such a big move. What factors should inform your decision to take on such a large financial commitment, particularly if you were previously renting?

The rental price versus mortgage payment is perhaps the most immediate, if not the most important.

“More often than not, the initially more expensive mortgage payment usually becomes less so over time”, said Sharp. She further added that wanting stability for oneself and family could also be a reason, as many want to “put down roots”.

The freedom from landlords and living in someone else's house, (and largely by their rules) will also be taken into deliberation, Ruddock said, in part because the buyer would now have “the flexibility to be able to personalise the house and make it a home”, while using their monthly payments to build equity which may be considered an investment later.

Despite the challenges faced by prospective buyers, there are perhaps more funding options available now than ever before.

“Financing for the new home can come from any of the lending institutions,” Sharp said. “These would include the National Housing Trust, banks, building societies or mortgage companies, and credit unions. The vendor in certain cases may offer a vendor's mortgage as well.”

Importantly, buyers should ensure that they get value for their money, Ruddock said, adding that they should engage the use of professionals who will ensure “the property has no breaches or encroachments, the structure is sound and [the] neighbourhood is acceptable and there is good resale value.


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