File
The National Housing Trust head office in New Kingston.

Susan Gordon, Business Reporter

The National Housing Trust (NHT) has hiked peril insurance by an average of 15 per cent, but says the added cost to mortgagors would have minimal effect on the savings derived from the reduced interest charges to service home loans.

On a $3 million mortgage loan repayable in 30 years, for example, a mortgagor would have seen almost $4,300 of savings from the two-point reduction on interest charges.

Loan servicing

The interest charges were reduced effective July 1.

But with the increase in the peril insurance, monthly loan servicing costs would only be reduced by $4,047, according to data from the housing agency, from $22,952 to $18,705 per month.

"The benefits from the interest rate reduction will outweigh the negative effects of the insurance increase," said NHT Communication Officer, Jacqueline Thelwell.

Interest rate cut

The applicable mortgage rate would now be five per cent. The interest rate cuts took effect July 1.

The mortgage includes the peril insurance charge which has now moved from $606.36 under the example cited to $850.50 - a 40 per cent increase - but the life insurance component is unchanged at $945.

The increased charge represents less than five per cent of the total mortgage payment.

Peril insurance is included in home loans to pay for coverage of the property against damage from man-made or natural disaster.

Any hike in the insurance will automatically pass through to the monthly mortgage payments.

But NHT has assured mortgagors that major savings expected from the two and one per cent reduction on interest rates would still be forthcoming.

susan.gordon@gleanerjm.com