5 months ago
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No matter where you are in the world, buying a house is a huge undertaking as real estate is typically the most expensive thing one owns. What should be a rewarding experience can quickly become daunting or stressful if you’re not careful. Having bought a home recently, I thought I’d document the experience to guide other aspiring Jamaican homeowners. Here is my six step guide on how to buy a house in Jamaica. NOTE: This article is NOT intended for professional advice.
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1. Budget & Pre-Approval
First things first, review your financial situation to understand how much you can afford to spend on a house. How much do you make each month? Is it currently feasible to increase your income by asking for a raise, improving your qualifications so you can secure a higher-paying job, or taking on a part-time job or side hustle? Ideally, experts recommend that housing costs should be no more than 30% of your gross income, and that includes mortgage, utilities, maintenance and property taxes. I don’t know about you but that’s easier said than done given our poor wages relative to cost of living in Jamaica, BUT you still want to ensure that you spend no more than 50% of your monthly salary on housing. That’s also how lending agencies will calculate how much to lend you for a mortgage.
Next, what are your monthly expenses like? I recommend tracking all your spending so you can see exactly where every penny goes! I’ve been doing this since I started my first job in 2019. I limit things which drain money like beauty treatments, dining out and partying. Instead, I mostly visit inexpensive or free places in my city, make my own meals and do my own hair and nails. Of course, to each their own but I recommend taking a serious look at your monthly expenses to see which ones can be reduced or eliminated altogether. That surplus money can be placed into savings or investments for your house down payment. You’ll need a minimum of 5% down payment. There are also hidden costs which I’ll get into later.
After you’ve worked out your income and expenses, contact a mortgage lender to get pre-approved for a loan. This will give you a clear idea of your borrowing capacity and show sellers that you are a serious buyer. The documents they’ll need from you include:
- TRN & NIS cards
- Last 3 months’ pay advice/slip
- Letter from employer including income verification, and verifying your NHT contributions (if you’re using NHT points)
- 1 valid government issued ID
- Completion of a credit authorization form so they can obtain your credit report
- Proof of Address.
This is also the time to ensure that you’re eligible to use National Housing Trust (NHT) benefits if you’re a first time home owner. You’re eligible for NHT once you’ve consistently contributed for one year, and you can get an interest rate of 0-5% for 7.5Million JMD or more if you combine with 1 or 2 other contributors who have never used their NHT benefit. That’s better than any other interest rate you’ll find in Jamaica which averages 9% in 2024. There are free mortgage calculators online which can give you an idea of what your monthly payments will be.
2. Research the Market
Stock PhotoDecide which areas in Jamaica you are interested in. Consider factors like proximity to work, schools, amenities, and safety. Look at real estate listings to get an idea of property prices in your chosen areas. City centres such as Kingston’s Golden Triangle are overpriced! I suggest widening your scope to suburban areas just outside the city for better prices and more square footage. Don’t be afraid to buy an older home if it is structurally sound and renovate it slowly. If I didn’t do these two things, my home ownership dream would’ve never materialized. In fact, there’s a new complex going up on my street right now for twice the price and with significantly less space than what I bought a year ago. Follow my advice; those new matches boxes are not worth it unless you’re bathing with money. I’m not. Another perk is if your property has income earning potential such as a flat, basement or helper’s quarters with separate entrance that can be rented for long or short term use.
3. View Properties
Stock PhotoYou can enlist a real estate agent to do the search for you, or do what I did. Scroll to the bottom of relevant listings on real estate websites, find the actual agent and company selling the property and reach out to them directly to schedule your viewing. The same property is shown on EVERY real estate website in Jamaica so otherwise, you may wait around for that agent/company to schedule a viewing with the correct agent/company which slows things down. Come prepared with questions and take notes on each property, considering factors like condition, size, layout, and neighborhood. Finding the right property is possibly the hardest part on this list but pray and trust God. The right property will land in your lap when you least expect it. Mine did.
4. Make an Offer
Stock PhotoYou finally find the right property! Based on market research and the condition of the property, determine a reasonable offer. The real estate agent will send you the offer form and may request additional things like a TRN, government issued ID, proof of address and source of funds such as a bank statement and pre-approval letter. It’s also at this point that you’ll need to hire a real estate attorney who will assist with the legal aspects of the purchase, including reviewing contracts and conducting a title search. I had a wonderful lawyer who I’d be happy to recommend– feel free to reach out if you’d like a contact. You’re also expected to pay your down payment at this time which can be as little as 5% of the property’s cost, as well as your half of the agreement for sale cost which is roughly 0.20% of the property’s cost. These costs are partially refundable should the sale fall through, and is best if done through a trusted lawyer.
5. Survey & Valuation
Stock PhotoHire a licensed surveyor and valuator to conduct a professional inspection. An inspection will uncover any potential issues with the property that may not be immediately apparent, and it’s at this point that things like breaches will be discovered– if any exist. Headache! Consider the findings and decide if any repairs are necessary or if you need to renegotiate the offer. These costs are highly variable but budget around $100,000JMD. Shop around for the best price but ensure you use someone on the approved list which you can find online or via your lending institution.
6. Finalizing Your Mortgage + “Hidden Fees”
Once you’ve obtained your surveyor and valuator reports, go back to the bank, submit all the required documents and secure your mortgage. It’s also where all the other hidden costs will make an appearance. By now you would have already paid:
- Deposit: minimum 5 or 10% of sale price
- Sale Agreement: 0.2% of sale price + GCT
- Surveyor & Valuator Fees: Variable, budget Approx. $100,000JMD
However there’s also:
- Stamp Duty: $2,500JMD (your half)
- Lawyer Fee: 3-5% of sale price
- Letter of Possession: $7,500JMD (your half)
- Letters for Utility Companies
- Mortgage Processing Fee, including mandatory house and life insurance. These fees are often in the realm of several hundred thousand dollars JMD. I recommend having a previous life insurance policy which can cover the cost of the property– works out cheaper.
With that said, you’ll need to save anywhere from 12 to 20% of the cost of the property you plan to purchase.
Congratulations, Home Owner!
Stock PhotoOnce you’ve gotten through all six steps above, congratulations! When all the funds are transferred, including mortgage disbursal by your bank to the vendor, you will receive the keys to your new home and a copy of your title. Expect 5 to 6 months from signing the sales agreement to getting your keys. The process is daunting but rewarding in the end.
Wrap Up
I hope this article was helpful! I love travel but I love having a base to come home to even more. My final points are: don’t be afraid to go a bit outside the town and take on a structurally sound older home. I likely wouldn’t have become a home owner otherwise. Are you a home-owner or is owning a home a plan for the future? Sound off in the comments section below, and share any other tips you may have for prospective buyers.
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