Mortgages in Today’s Market

There is no doubt that the economy has changed within the last few years. Has Trinidad & Tobago’s mortgage market grown? The Central Bank’s website seems to point to this. Total Real Estate Mortgages as at October 2000 stood at $3.662 billion TTD compared with July 2011, the figure was $11.386 billion (310% of what it was 11 years ago). So there remains asubstantial amount of mortgage activity in T&T amidst the noted inflation.

Today, it is clear that the environment is very inviting to take a new mortgage or to refinance your existing facility. Some inviting factors are the very low interest rates, tax relief for new homeowners, reduced stamp duty, reduced construction costs (to build a new home), introduction of the Mortgage Market Reference Rate (MMRR) by the Central Bank of T&T (CBTT) and low CBTT repo rate.

  • Interest Rates

The interest rate on new mortgages is at an all time low. The Central Bank has recently launched the policies and guidelines surrounding its Mortgage Market Reference Rate. This yardstick will also see homeowners benefitting from an independently published rate to compare with their mortgage rates. Most mortgages will now be pegged against this benchmark.

  • Tax Relief & Increased Stamp Duty Exemption

There is a reintroduced tax incentive for new homeowners up to $18,000 TTD. This should result in extra funds coming back just for being a home owner. Another good factor in today’s environment is that the government has also increased the stamp duty exemption limits for residential & commercial purchases within the last few years in a bid to support real estate activity. An interesting point to note is that sometimes a person purchasing and building their home may pay less overall stamp duty.

 

  • Mortgages in Today’s Market….Continued

E.g. A residential lot costing $400,000 is exempted from stamp duty. If the person builds an average 3 bedroom home for approximately $600,000 (1,600 square feet at average construction cost of $375 per square foot), the total output is $1,000,000. If the same person decides to sell the new completed home for $1,000,000, the new home purchaser will have to pay only $4,500 stamp duty on the conveyance.

  • Refinancing & Consolidation

Every person should always be monitoring their financial positions. One of the best practices employed in prudent financial management is to borrow at the cheapest cost. Now is a good time to reduce those high interest rates on your mortgage loan. It is also timely to refinance to improve one’s property condition. Construction cost has experienced some degree of decline over the last few years. This coupled with reduced interest rates indicate a good time to do some of those long awaited refurbishment’s, as home improvements normally benefit the homeowner as their equity is increased, and when it comes to buying a home there is no time like the present time.

Submitted by Terra Caribbean