Mortgage and Home-Buying Tips

 

What Factors Determine How Much I Can Afford?

A key consideration for mortgage financing is affordability.  In order to qualify for a mortgage, the prospective borrower must, among other things, be able to afford his or her monthly mortgage payments.

Three factors determine what your monthly payment amount is: -

(1) Mortgage amount

(2) Repayment period

(3) Interest rate charged

Your mortgage amount will be based on the amount of equity or downpayment that you can provide after you have decided on the price of the property you want to buy.

The repayment period and interest rate charged are variable factors and can affect your mortgage installment depending on how long you have to pay the mortgage and how high or low the prevailing interest rate is.

The longer the period in which you have to pay your mortgage, the lower your monthly installment will be. Also the lower the interest rate charged to you, the lower the monthly installment you pay.

 

Where should I start looking for a home? Should I buy or should I build?

This is the most difficult decision that one must make when acquiring a new home. The process of locating or building a suitable home is not usually a decision that is taken quickly. The first thing you need to know is how much money you can afford to pay for a house.


Some useful tips on buying a home:

· Decide beforehand in which area you want to live and concentrate your efforts on that area

· Contact Real Estate agents and advise them of the amount you can spend on a property and the area in which you would like to live

· Refer to newspaper advertisements

. Visit Ghana Home Loans' links to property developers 

· Let people know that you are in the market for a home.

The house that you purchase should take into consideration:

· the size of the land you desire

· number of bedrooms for your family

· additional amenities required - Family/T.V. room/gallery, etc.

· desirable neighborhood

· close proximity to transportation, schools, shopping and other services

· availability and reliability of utilities

· security

 

Tips on viewing a prospective home:
Examine the house carefully for:

· leaking roofs - i.e. water stained ceilings

· visible cracks/repaired cracks....especially wall joints

· moisture damage on walls/floors

· shifting foundations - exterior cracks should be carefully examined by a construction professional.

· leaning walls

· termite eaten woodwork/droppings

· deteriorating floors

· dilapidated cupboards

· damaged plumbing, e.g. flush all toilets, turn on/off all faucets etc.

· worn or exposed electrical wiring - turn on all electrical outlets and motors

· land slippage

 

All of the above will provide you with an idea of the condition of the house and therefore, enable you to contact repair specialists with a view to determining the costs you will incur to rectify those problems. That, of course, will determine the price you pay for the house.

Tips on Building a Home:

  • Seek advice from architects, quantity surveyors, surveyors, real estate agents, land developers and town planners.
  • Inquire about the services and efficiencies of several reputable contractors or builders before deciding on one.
  • Make personal checks on costs for verification of estimates received.
  • Try to fulfill your immediate needs and do not over-extend yourself financially.
  • Plan ahead what your family needs are and construct a home that fulfills those needs or is capable of being expanded/modified.
  • Build a home that suits your family's lifestyle. For example, if you have children or are planning on a family, play-space must be accommodated.
  • Avoid making alterations to the proposed building during construction. This practice may lead to additional costs not catered for in the estimates.
  • Look around for properties that you like and inquire about the designer and builder.
  • Sound financial management and discipline is very important in order to avoid cost overruns. Once you have decided on material specifications, keep to your plans.

 

Buying An Existing Home
Once you have located a home which you would like to purchase:

  • When making an offer to purchase, with deposit, please insure that it is conditional on securing adequate mortgage financing. Any agreement signed should incorporate this feature if you require mortgage finance to complete the transaction.
  • Get tentative approval for your mortgage financing before making a down payment on the property.
  • Submit a written offer to purchase the property, prepared by your lawyer or Real Estate Agent.
  • The seller must provide you with a copy of the proper deed for the property.
  • Have an independent search done on the property to determine that it is free from all encumbrances.
  • Have a lawyer prepare a purchase agreement between yourself and the vendor and have it properly signed and duly stamped.
  • The purchase agreement states the price, down payment amount and terms and conditions regarding final settlement of the purchase transaction.
  • The purchase agreement usually gives you ninety (90) days from the date of down payment in which to settle the mortgage details. Therefore you can now proceed to Ghana Home Loans to apply for your mortgage. Under the terms of the purchase agreement, once you make your down payment, the seller of the property must assign the insurance coverage on the property to you.

Advice on Buy-to-Let Mortgages

When you decide to buy property for investment purposes with a buy-to-let mortgage, you should not assume that you will always secure tenants for your house.  There could be long periods of 6 months to 1 year when the property could be unoccupied. 

Again, as the landlord you may have to undertake significant repairs from time to time at the request of your tenants.  Mortgage payments will however be due and payable irrespective of the revenue flow you may or may not be receiving at the time.

It is therefore prudent to build a reserve equivalent to 6months to 1 year of mortgage payments to ensure that you can meet your obligations during periods of financial difficulties.

 

Now That I Have Negotiated My Mortgage - What Do I Need To Finalize The Transaction?
You have negotiated a mortgage that best suits your needs at the most favorable terms and conditions. The following will occur to complete the mortgage transaction:


(a) Offer Letter:
Ghana Home Loans will consider your application and will provide you with a letter of approval by way of a Offer Letter. This letter outlines the sum of money which will be granted to you under a mortgage agreement and it stipulates the terms and conditions of the mortgage.

You will be asked to sign the Offer Letter having agreed to the terms and conditions. Offer Letters are fairly standard in its content. The only significant differences that will affect your decision-making are the terms and conditions relating to late payment of monthly installments and any penalties applied for early repayment of the mortgage.

Upon submission of the signed commitment letter you will legally bound to draw down on the mortgage and interest begins to accumulate.

(b) Fire Insurance Policy
Once the mortgage is approved, you will be required to obtain comprehensive all risk insurance coverage on the property purchased or built for the amount recommended by the surveyor. The insurance has to be effected just prior to completion of the mortgage agreement.

(c) Legal Requirements
Ghana Home Loans will advice our lawyer that a mortgage has been approved in your name for the purchase of your prospective home. We will instruct the lawyer to carry out the necessary searches and prepare the necessary documentation to complete the mortgage transaction.

Searches - The lawyer will carry out a search at the Land Registry to determine that your prospective home is free from all encumbrances, i.e. that the property has good and transferable title. These can be obtained from the person from whom you are buying or, depending on the terms and conditions of your purchase agreement, you may have to pay the outstanding amounts.

Preparation of Legal Documents - Once they determine that the property is transferable, the lawyer will prepare the necessary legal documentation.

A Deed of Conveyance is prepared transferring ownership from the previous owner of the property to the prospective applicant. Also, a Deed of Mortgage is prepared which is the agreement between you and GHL detailing the terms and conditions of the mortgage. The Deed of Conveyance will have to be signed by you and the seller in the presence of a lawyer. In addition, you should sign the Deed of Mortgage.

The funds will then be disbursed in the manner indicated below. This is referred to as the Execution of the Legal Documentation. Once the execution is complete, the mortgage transaction is effectively closed and your mortgage agreement with GHL is then in place. At this time you will be required to pay the lawyer for their services as well as pay the Stamp Duty (if any) that applies to the Deed of Conveyance and Deed of Mortgage.

The lawyer will then register the two legal documents and pay the necessary duties. Once the registration is complete, you will be provided with completed copies of the documents for your records.


Disbursement of Funds - The lawyer will advise Ghana Home Loans that the property has good and transferable title and that the documents are prepared. They will then instruct Ghana Home Loans to issue a certified cheque to them for the mortgage amount less any outstanding fees or charges that may be due GHL.

The lawyer will in turn issue a cheque to the vendor of the property. Interest charges start to accrue from the date of disbursement of the mortgage funds to the lawyer. Your mortgage will be amortized from the first month following the execution of legal documentation.

Now that you have Closed your Mortgage you Need to Ensure the Following: -

Land Registrar:
The lawyer will provide you with a completed Return of Ownership form which you need to record the transfer of ownership in the Land Title Register.

Prompt payment of mortgage installment
Your mortgage deed stipulates terms and conditions regarding prompt payment of monthly installments. Ensure that your mortgage installment is always paid on time. You will incur additional interest charges for delayed payments.

Under the terms of your mortgage agreement, Ghana Home Loans has the right to foreclose on your home if you allow arrears to build up.


Prompt Payment of Insurance Premiums:
Ghana Home Loans will require you to make prompt payment on Life and Property Insurance premiums on the respective due dates.

Non-payment of these premiums effectively erodes the security that you have provided Ghana Home Loans and therefore we will strictly monitor these payments. Ghana Home Loans will advise you of non-payment and ensure prompt future payment.