Habitat for Humanity is not a give-away program. The selected families help build their
homes and then purchase the property. The purchase price to the families is reduced by the
generosity of the community by donating labor and discounting material. Habitat then finances
the purchase through an interest free mortgage. The interest
free mortgage is part of the "Biblical base" on which Habitat operates and worships God.
A major cost in building a house is the material that goes into the structure.
Habitat solicits and receives donations and discounts of materials whenever
available. Significant discounts can greatly reduce the cost of the building.
Labor is another major cost of building a house. Labor is the human hours required
to plan the project, acquire materials, hammer, paint, install, landscape, etc.
Professional electrician Ted Gora donates his time
and trains volunteers to wire Habitat homes.
Habitat recruits volunteers from the community to perform these tasks at no cost to
the family. The families selected to receive the homes also provide "sweat equity"
hours on their own homes and the homes of other families.
Habitat homes are appraised on the same standards as a conventional home. An appraisal
of a Habitat home determines the market value of the finished home, that is, how much
is the new home worth on the open market. A Habitat homeowner does not pay this amount
but rather the cost of the construction which was reduced by the generosity of the community.
The selling price is what is expected to be actually paid for the house. On the open market
a Habitat house that goes to a selected family for around $55,000 might sale for $90,000 on the
open market.
The conventional means of purchasing a home requires a financial loan over 15 to 30 years at an
interest rate of 5% or more. This method of financing a home purchase adds many thousands
of dollars to the cost of the home. The Lord declared that charging interest to those unable
to handle it is wrong. This is one of the great principles on which Habitat functions and by
which low-income families are able to afford our homes. Habitat families pay a mortgage
for the cost of the home to be paid back over 20 years at 0% interest.
The life of a conventional loan can range from 15 to 30 years. A Habitat mortgage is set at
20 years.
A conventional mortgage on an equivalent home on the open market will run around $500, but the labors
of the volunteers, the materials and moneys donated by the community, and the interest free
mortgage lowers the payments for the families to the $300 range.
By the time a mortgage is paid off a conventional home purchased for $90,000 on the open market
will have cost the buyer around $174,000. A Habitat family will have paid only the original
purchase price, around $55,000.
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And if thy brother be waxen poor, and fallen in decay with
thee; then thou shalt relieve him: yea, though he be a stranger, or a
sojourner; that he may live with thee. Take thou no usury of him, or increase:
but fear thy God; that thy brother may live with thee. Thou shalt not give him
thy money upon usury, nor lend him thy victuals for increase. I am the LORD
your God.
Leviticus 25:35
| Habitat vs Conventional Mortgage |
|
|
Habitat | Conventional |
| Material Cost |
$52,500 |
$60,000 |
| Labor Cost |
2,500 |
17,500 |
| Appraisal |
90,000 |
90,000 |
| Selling Price |
$55,000 |
$90,000 |
| Interest Rate |
0.0% |
5.0% |
| Mortgage Duration |
20 years |
30 years |
| Monthly Payment |
$229.00 |
$483.14 |
| Final Cost of Mortgage |
$55,000 |
$174,000 |
|
