THIS week we are aiming to answer the question of “how much mortgage can I afford?” The question will attract different answers depending on your age, income and interest rates, among other factors.

Using the unit pricing for the recently completed Ruthven Towers by the National Housing Trust (NHT) as a market price proxy, we were given estimations by the National Commercial Bank (NCB), which was the only one of six local mortgage providers which responded to the Jamaica Observer query, issued first in November 2021 and again last week.

We are assuming that each applicant has access to the $6.5-million loan from the NHT to first time homeowners. This amount can be applied for and combined with the bank mortgage loan. NHT interest varies but the highest is four per cent. The interest rate offered by NCB is 6.5 per cent.

For the one bedroom, the portion of the mortgage remaining to be financed is $19.815 million if the option of 95 per cent financing is chosen. If the 90 per cent option is chosen the loan needed to buy the unit will be less at $18.43 million.

For the two-bedroom unit costing $36.4 million, the amount remaining to be financed after NHT is $28.08 million under 95 per cent financing, or $26.26 million under $90 per cent financing.

Ruthven Phase one is now sold out, but the one bedroom price of $27.7 million and two-bedroom unit price of $36.4 million are still good ballpark measures for the current market in Kingston.

There are upscale units in Kingston selling for as much as US$2 million each, but we do believe the Ruthven pricing would be more applicable to those who are budgeting for a first-time mortgage in the current economic climate.

The estimates will give readers an estimation for planning. We used as our “clients”, Jamaicans aged 22 years old, 30 years old, 40 years old and 55 years old. If you fall within any of these age bands, you will be able to relate.

For all individuals seeking a mortgage, the options are either 90 or 95 per cent financing with repayment periods ranging from 10 years to 35 years to repay, depending on your age. The younger you are the smaller your mortgage payment will be and the longer the repayment period.

A 22-year-old would have 35 years to pay off the bank portion, but up to 40 years for the NHT portion. Comparatively, a 55-year-old will only be able to secure a ten-year mortgage.

Monthly payments for the one-bedroom unit priced at $27.7 million for the 22-year-old would be $119,713.18 (NCB) plus $30,219.38 (NHT), leading to total mortgage payment of $149,932.56 monthly. If the 40-year NHT option is selected, the total monthly payment to all lenders will be $139,869.

If the 22-year-old wanted to purchase the two-bedroom unit for $36.4 million and chooses the 90 per cent financing option which includes payment to the NHT for 40 years, the monthly mortgage payment is $158,650.92 (NCB) plus $28,524.30 (NHT) for a total monthly payment of $187,175.22.

Buying a house at 30 years old

For the 30-year-old applicant, the one-bedroom house with a $27.7-million price tag, under the 95 per cent mortgage option, this applicant face a mortgage of $133,792.30 (paid to NCB) $36,024.86 (paid to NHT) with a total monthly payment of $169,817.16

In 25 years this two-bedroom unit would be paid off and belong to him or her. But, what would be the scenario if he or she opted for the 95 per cent mortgage?

In this case the bank portion of the mortgage would be $124,440,68 (NCB) and the NHT portion would be $36024.86 for a total mortgage of $160,465.54. The savings attached to the 95 per cent mortgage option is about $10,000 each month.

The 55-year-old borrower will only get 10 years to repay his or her mortgage loan and so the monthly payment is much higher. For the two-bedroom unit costing $36.4 million, under the 90 the monthly payment would be $318,842.00 (NCB) plus $69,099.81 (NHT) for a total $387,942.53 paid as mortgage each month. If he or she opts for 95 per cent financing the monthly mortgage would be about $10,000 more each month.

NCB indicates that it did not include expected income levels in these estimates, as “income is only one of the factors considered in approving loans. As a result, stating income levels alone would not provide a complete picture.”

Mortgage lenders also require a loan commitment fee. It is usually 3.5 per cent of the loan amount. For the unit priced at $27.7 million, the expected commitment fee is $921,025.00 (3.5 per cent) and $460,512.50 with bank discounts leading to a 1.75 per cent commitment fee.

Under 90 per cent financing, the commitment fee is $872,550.00 (3.5 per cent) or $436,275.00 (1.75 per cent) discounted.

For the unit priced at $36.4 million the commitment fee expected from the applicants is $1,146,600.00 (3.5 percent) or $573,300.00 (1.75 per cent) discounted, under 95 per cent financing.

If 90 per cent financing is selected, the commitment fee will be $1,210,300.00 (3.5 per cent) or discounted for bank clients to $605,150.00 (1.75 per cent).

For the monthly mortgage calculation for 40 year olds and for monthly mortgage payments for other age groups in each pricing band, please see the graphics attached to this story.