Music lovers of my age would recognise the title of this commentary, as the opening lines of the chorus of George Benson’s bumper hit “20/20 Vision.” They would probably be able to complete the chorus thus:
“…if I understood the what, when, why, and how,
Now it’s clear to me,
What I could have done,
But hindsight is 20/20 vision.”
Benson’s hit is about love. Here, I write about homeownership. First, here’s some brief context.
Memories
I was born and raised in Grass Street. I was thoroughly enjoying every day of the 13 years I lived there, until my mother looked into her crystal ball and decided it was time to move out. My father got the same message from his crystal ball, but was reluctant to move. I assumed that like my siblings and me, he had become accustomed to our home and our neighborhood. But as all loving husbands do, he acquiesced to his wife’s wishes.
After spending two years in a house on Micoud Street, we moved to another house on the same street. Just as we had begun to settle down, the landlord, who lived overseas, decided to return home. He was kind enough to give us time to find a new home.
We had tired of all the packing and moving. Homes were available in the second phase of the Entrepot Housing Scheme. The only hitch was that acquiring one of them involved a 20-year marriage with the St. Lucia Mortgage Finance Corporation. That was when we learned of Daddy’s healthy aversion to debt, which he equated with poverty and slavery. While he was normally a positive-minded person, he was petrified about all the things that could go wrong over two long decades, like losing his job, or falling ill and not being able to work. But what unsettled him most was losing his independence and his hitherto, unfettered ability to speak his mind on matters of national importance.
Reality
These memories were rekindled last week, as a friend recounted his own experience with building and financing his “dream home.” In short order, his dream became a nightmare. Like most parents, he had built a home, big enough to give his children their own bedrooms. Then, the hard times hit and he fell behind on his mortgage payments. Every call from the bank gave him a “ladjidit.” Eventually, with the bank’s approval, he sold the house, cleared his mortgage and built another, smaller house, which is fully owned by him and his wife. Such stories are becoming increasingly common.
Upsides
For those people who can afford it, owning a home is a no-brainer. For them, being a lifetime tenant makes little sense. They figure the money they will pay in rent can easily go towards owning their home. Why help your landlord to pay off his/her mortgage, when you can easily apply that rent towards repaying your own mortgage? Moreover, most people see homeownership as an investment that can yield long-term benefits for them, their children and grandchildren.
There are other upsides to home ownership. For example, once you have completed your mortgage payments, the house is yours and you can pretty much do with it, all that is legally allowed. Another benefit is that part of your annual mortgage interest payment is tax deductible, meaning that you pay less income tax. However, you may lose some of that benefit to property tax, which is assessed based on the size of your home.
Downsides
But building and/or buying a home is definitely not for the faint hearted. First, you must prepare yourself for the very real likelihood that despite your best efforts, at least one building professional will try to build his home “on your head” that is, with your money. If you know nothing about construction, or you live overseas, or you’re a woman, heaven help you. You might buy 12 gallons of paint, but only 6-gallons is used on your house. Having legally binding contracts with these “professionals” might offer you some protection, but obtaining legal redress can be extremely difficult and costly. Turning to a lawyer for help can lead to all kinds of distress.
Second, there’s the small matter of getting your building plans approved, which can generate no end of headaches. Your technician might assure you that your plans have been lodged with the Development Control Authority (DCA), when that’s not the case. If your home is within a private subdivision, you may have to wait a lifetime for decent roads to be built by the landowner. Then you have to deal with “construction thieves” who target your house while it is being built, and steal your building materials, fittings and furniture, just as fast as you bring them in.
Financing Blues
Third, by the time you get to the bank to negotiate your mortgage, your brain could be too frazzled for you to grasp the intricacies of the various mortgage terms being offered. Some banks and cooperatives offer 100% financing, while others may require you to put in at least 10% of your money as “equity.” If you opt for an “adjustable-rate mortgage,” know that your monthly interest can go up or down, as opposed to a “fixed-rate mortgage” which has an interest rate that will not change during the mortgage term. There’s also an “adjustable-rate mortgage” which has a variable interest rate over a shorter term. The rate may go up or down, and at the end of the term, you can continue with the adjustable rate or convert to a fixed-rate mortgage.
The arrangement that worked for me was an “amortized mortgage.” In this case, payments were spread out over the term of mortgage. In the early years of such a mortgage, more of your monthly payments will go toward interest, than principal. Towards the end of the mortgage, the reverse happens. However, if at the beginning of the mortgage, you pay, say $20.00 extra per month, that ought to go directly towards reducing your principal, so that the life of your mortgage will be reduced. By doing this, you can cut at least 3 years off a 20-year mortgage. As can be appreciated, some banks don’t like this type of mortgage. My banker, who was a dear friend, did her best to discourage me from making these accelerated payments. I am not sure whether this type of mortgage is still being offered.
Being Lucky
So, let’s assume you have held your nerve, fought a good fight and moved into your brand-new, mortgaged home. You deserve to be congratulated. If you’re lucky, no cracks will appear in the walls or foundation. You will experience no plumbing woes and your home will not be affected by extreme weather events. If you had your wits about you, you would have insured your home against such perils. Practically all banks will insist that you do this, to protect their investment and yours. Remember, the house is not yours until you have fully repaid your mortgage.
And if you are REALLY lucky, the real estate value of your home will increase while you are repaying your mortgage, so that if hard times hit and you must sell your home, you can recover more than your equity. These days, such an outcome is not guaranteed. Indeed, the reverse can easily happen. As we have seen in parts of Entrepot, Sans Soucis, Gros-Islet, La Clery and Vieux-Fort, the character of a neighborhood can suddenly change. Most people who decide to sell their homes are shocked to find its market value does not reflect the money they poured into it, over the years. And further, they are dismayed to find out all the harangue that’s involved in selling their home.
Renting your home is no walk in the park. It’s easier to find an atheist in church than to find a good tenant who respects your property and pays their rent on time.
If I knew all this back in the mid-1980s, when I bought my home, I would probably have remained a tenant. Still, I have nothing but unbridled admiration for those who take on the myriad challenges of home ownership. As I move around the country, and see the countless houses being built, it seems clear that homeownership is on the rise.