A Start Towards Building Your Own Home

If there is anything common to almost all Jamaicans, it is perhaps the burning desire to become home owners and stop paying rent. Now if you opt to build a house, it is important to note that it is not as difficult as it might appear, especially if patience and discipline are brought into play.

One source, in fact contends that it is quite possible to build a home at a cost of about one-third cheaper than that to buy a similar one. How do you go about this? Firstly, you need to identify a suitable plot of land. Next, obtain a mortgage arrangement to acquire the land. For most people, this will mean finding up to 23 per cent of the cost of the land to cover a deposit and provision for associated expenses. Then the option of using the National Housing Trust's mortgage programme should be explored. This allows for repayment at interest rates of as low as two per cent per annum. The cost of land could represent about 20 to 25 per cent of the cost of putting up a house, depending, of course, on the type of house being considered.

After obtaining a mortgage arrangement, you need to get a design for the house and have it approved by the Town Planning Department or the building section of the relevant Parish Council. For simple designs, an experienced draughtsman will do. They usually charge per page for the drawings. For a three-bedroom house, a simple design is not likely to require more than six pages. An architect and/or structural engineer will definitely be needed where the design is more complicated. These professionals charge by the hour. One cost-cutting measure here could be to bargain with the younger professionals in the field, as they are more likely to offer bigger discounts.

It is wise for potential house builders to set aside a manageable amount of money monthly, to purchase raw materials. This is just like putting the same sum in a bank monthly, only now you are putting it into physical assets - the materials for your house. It is also good for young people to live with their parents or relatives for as long as possible while saving money to build their houses.

Potential house builders should begin by buying some of the heavy materials, such as blocks and steel. Near to the time when construction is to begin, it is time to order aggregates like sand and gravel, along with cement. A few workmen, including a carpenter and contractor, should be enough for the job. Owners are advised to be on site as much as possible during construction, as this tends to boost worker morale. Since the process is to last for months, the workers will likely show up more promptly because of your presence.

You are now well on your way, with patience being one of the key ingredients thereafter. Maintaining and, where possible, increasing your monthly commitment to the project, should see you gradually making your way home with the knowledge that YOU DID IT!

A Step-by-Step Guide to Buying a Home

For most people it's their biggest investment, so owning a home, especially your first, is certainly a big deal.

Therefore, in seeking to acquire a home, it is wise to seek guidance from early, and to follow the recommended steps, in an effort to ensure satisfaction 'all the way home'.

• Your first step should be to find out how much money you can afford to borrow. Your local mortgage officer will be able to give you a good estimate of this. 
• Examine the sort of mortgage arrangements that would best suit you. While all mortgages essentially work the same way - you borrow a lump sum of money to buy a property, then you repay the loan through monthly payments over a period of many years - the real difference is the options offered within the various mortgage plans.
• Find out the details of a number of expenses, which will soon become due. These include stamp duty , a legal fee, application fee, surveyor's report fee and a number of other lesser charges.

Generally up to nine per cent of the purchase price should be needed to cover all the related expenses. These fees are referred to as closing costs.

• If you have not already done so, it is now time to locate the home you wish to buy. This is more a consideration of where you want and can afford to live, the kind of amenities and surrounding infrastructure, its resale potential; as well as the space and location of areas for activities like gardening and leisure.
• Once you have decided on a property, the next step is the really big one, but usually it's the most satisfying. It is now time to make the property yours!

Discuss the sales agreement your attorney who will tackle the legal work while the lending institution involved deals with the mortgage arrangements, to tie up a deal.

• When your offer has been accepted, with things like valuation and surveying of the property done, it is time for your attorney and the seller's attorney to settle on the contents of the contracts to be exchanged, including the very important fine prints.
• Now you may lodge your deposit with the lending institution ( mortgagee ) or otherwise, as directed.

All being well, with the contract exchange and your attorney having tied up any legal loose ends, including the transfer of the balance of the purchase price to the seller, you can then move into your new home.

How do I House my Family?

The greatest dream of most Jamaicans is to own a home, their “piece of the rock”, which is vital for shelter and provides the family stability in order for growth and development.

We are in what is known as a “Sellers Market” as prices for homes seem to be moving upwards, indicating a demand that is outstripping the available supply. The fear that many people have is that if they wait too long to buy a house, they could find themselves priced out of the market or at least out of the areas that they like best.

Becoming a homeowner is a big commitment and more expensive than most first-time buyers ever realize. However, having the right people on your side is very important and information is key to making the process a stress free one. Before moving forward, you should have a clear idea of what you really want and what you’re getting into.

Should I Build?

The best way to get that dream home is to build it, as it gives you the opportunity to customise your home to suit your taste, the needs of your family and sometimes it may work out cheaper than one built by a Housing Developer. However, the road to completion of that dream home could get quite rocky, if you do not have a team of competent professionals around you or have no experience in construction or project management.

Among the variables you face when contemplating building:

• Finding the right Location. The costs to build a 2,000 sq. ft home in Cherry Gardens or in Grants Pen might be the same, but the market value upon completion will vary widely. Desirable (and affordable) land in Kingston & St. Andrew is hard to find and it is likely to be cheaper the further you go from the built-up urban areas, but, you might encounter additional expenses in transporting material and site preparation, especially if the land is not flat.
• The cost of materials. The price of building materials can swing substantially in price, depending on the supplier, demand, problems with importing and the fluctuation in the Jamaican Dollar.
• The cost of labour. Shoddy workmanship can result in your costs increasing tremendously to make the required corrections and ensure the safety of the structure that will house you and your family. The low seasons for employment in the building trade can mean cheaper labour, while a sudden increase in housing (or at Christmas time) can cause everyone’s costs to increase, as remodelling projects and new construction abound. After the hurricane, most of the able-bodied builders were fully occupied doing repairs to damaged buildings and their rates naturally went up.
• Building Plan Approvals. Getting approval for building plans from local authorities can prove time consuming. The delays for building plans to move between the different regulatory agencies, which are not located under the same roof, can delay the approval time. There is also a need for clear planning guidelines as what may be requested by one agency might conflict or differ from that requested by another agency and this will have your architect going back to the drawing board several times.
• Controlling your own desires and whims. A toilet for your bathroom can be as low as $3,000 or as high as $30,000 it all depends on what type of fixtures you want. You can have a home that’s a relatively easy-to-build single storey box building, or you can want a two storey building with fancy Grecian columns and custom windows that will drive up the price. There is also the temptation to make sudden design changes to the building

when you are mid-way in the construction, this can cause massive costs variation. It is always a good idea to build according to your needs and not based on what our friends and neighbours have.

As impossible as it may seem, you must have a solid cost estimate before you break ground. If you’re financing your home with a building loan, lenders will insist that you have a budget and demonstrate the ability to finance it. Even if you plan to build from your own resources, having a spending plan in place can keep you from going bankrupt.

An architect, if you decide to use one, can offer valuable information about the building process, how much your home is likely to cost and should be able to give you ideas to save money. If you're not using an architect, it is best to give your plans to three builders and get estimates of what it will cost to build your home. The experts all agree that an additional 10% should be added to your budget to deal with any unforeseen circumstances.

Should I Buy?

The big benefits of home ownership

There are a lot of other good reasons to own a home. One of the best, financially speaking, is the opportunity to benefit from appreciation as the value of your home rises through the years. In fact, if you’re like most people, buying a home can be the smartest financial decision you’ll ever make.

Homes create wealth in two ways

First, mortgages require you to pay down your balance over time, creating a form of “forced savings.” Even if your home never appreciates at all, you gradually build up more equity over time with your payments.

Of course, most houses in Jamaica do appreciate, averaging about 20% a year over the past 10 years. And thanks to your mortgage, you get to take advantage of that appreciation using leverage. That means using a little of your own money, plus a lot of someone else’s money (in this case, the mortgage lender’s) to make even more money.

How your mortgage helps you build wealth

Here’s how it works. Say you purchased a Quad in Greater Portmore in 1991 for $90,000 and they have been appreciating at an annual rate of about 23%. In 2005, your house would be worth more than $1.6m. That means your down payment -- $9,000 -- would have grown to equity that equals $1,519,000. The growth in your home’s value represents a return of 275% per year on your original investment.

Even if you take out maintenance costs of 2% of the home’s value each year and throw in another 1% for Peril insurance and utility bills, you’re still looking at a return of more than 200% a year.

But this calculation also comes with caveats:

• If you sell your home within 3 years you won’t get all of the benefit. Every time you change homes, you lose about 20% of the value to selling and moving costs.
• Out-of-control spenders can still lose. If you drain off every dollar in appreciation through home equity loans and lines of credit, you aren’t building wealth -- you’re destroying it.
• Home prices don’t always appreciate. Sometimes they plateau or even decline. There have been periods in our real estate market where you would have been better off renting and investing your down payment in the stock market.

Overall buying a home is the best alternative for most persons, as it carries great benefits for you and your family, but, you must be ready for this commitment to find the required deposit and closing costs, noisy neighbours and sometimes, unexpected expenses.

Homeownership as I hope we have discovered, is not a ‘one size fits all’ it must be seen as part of our wealth creation strategy and we must choose the option that best suits our particular circumstances in life.