How Partners Pay For Their House

By Liz Gall and George Massey

October 26, 2000

The houses built by Habitat for Humanity of Northwest Connecticut are sold to Partner Families at no profit. Our Partner Families pay for their houses with a combination of sweat equity and a no-interest mortgage.

The Cost of the House

The cost of the Partner Family’s house is calculated by adding the actual costs of materials, the wholesale value of donated items, costs for surveys, permits, well, septic and driveway and any paid labor. Paid labor often includes electrical, plumbing and heating work as well as any other elements of construction deemed too difficult or dangerous for our volunteers.

Sweat Equity

Partner families must contribute 400 hours of their own labor as part of their house payment. Sweat equity is generally accomplished through building the Partner Family’s own house. However, sweat equity can also be earned by donating time to building other HFH houses or participating in other approved Habitat activities.

Objectives of Our Financial Arrangements

The financial arrangements regarding the sale are designed specifically to suit the situation of Northwest Connecticut. Our objectives are:

  • To make the house affordable in this area of high land prices,
  • To encourage the Partner Family to remain in the house and provide them an increasing equity in their house over time,
  • To provide the Family with a fair return without windfall profits, and
  • To fund the purchase of additional housing lot(s) for other partners(s) through the proceeds from increases in land values.
Partner Family’s Financial Responsibilities

The Partner Family is offered a mortgage for an amount equal to the cost of the house. As we will discuss later, we do not charge them for the land on which their house sits. Depending on the cost of the construction of the house, and to make the monthly payment affordable, the mortgage varies in length from 15 to 30 years.

The Family is responsible for keeping its mortgage payments current. In addition, it is responsible for paying property taxes and insurance.

House Sale

The Partner Family can sell the house at any time, though HFH holds rights of first refusal in certain circumstances.

To meet our objective of providing the Family more equity the longer they stay in the house, we share an increasing percentage of the profits from the house’s sale for each year of occupancy. There is a maximum of 80% on the amount of the house profit shared with the Partner Family. The remaining 20% of the house profit goes to Habitat to help build houses for other families.

Land Sale

The Partner Family is not asked to pay anything for the land on which the house is located. The Partner Family is, however, the owner of the land during the same period that it owns the house.

Having not paid for the land, the Partner Family consequently does not receive any of the value attributed to the land at the time of sale. Habitat for Humanity of Northwest Connecticut uses the money from the land to help build other houses for other families

/***/

These arrangements enable the Partner Family to own a house they otherwise would not be able to. Financial comparisons show us that the return on the Partner Family’s investment is quite fair and Habitat is able to build more houses for more families over time.

 

 
 Page last updated 11-9-2004