In some ways applying for a mortgage in the Caribbean is no different than applying for a mortgage at home. The 3C’s of credit apply everywhere. There are some key differences however, which can make qualification more difficult than you may be aware of when buying your new vacation home.
Debt Service Calculations
Debt servicing is the amount of debt you have versus the amount of income your household brings in, it should be fairly simple but even here we see some major differences. Generally as a rule of thumb, banks take the outstanding debt you have, and use that in your debt calculations. However, most Caribbean banks use the credit limits you have versus what is actually owing. For many clients who have large lines of credit, or credit cards, this can prove to be problematic. If you have a $50,000 credit card with no balance, the bank will assume it is fully utilized and count the $1,500 per month (3% of the limit) against your income.
Depending on the property you purchase, the bank may not include rental income for the property you are buying, again limiting your buying power. For many buyers, the rental income is not only important to them owning the property but they need this income in order to qualify for the financing.
Income Issues
In North America, banks have adjusted to the needs of their self employed clientele, and offer mortgages which take into account the fact that their income is lower on paper than in reality. Stated income or business for self mortgages are common place. In the Caribbean however, these loans are non existent, meaning you will need to qualify on the income you claim on your taxes; this can be a challenge.
Down Payment Requirements
As a non resident of the country you are buying in, you will need to put down more money than you would be expected to in your home country. When you qualify for a mortgage at home with a small down payment, it is because the mortgage is insured in order to promote home ownership. There are no programs for this in foreign countries.
As a general rule, you will be required to have at least 30% down payment when you qualify with a local bank. In some locations, this number may vary but you can count on it being within 5% one way or the other.
The Must Have’s to Qualify for a Home Loan
Just as you would require at home, here are the must have’s in order to qualify for a bank mortgage in the Caribbean:
- clean credit
- strong income
- significant net worth
- income taxes must be filed and up to date with no taxes owing
- at least 30% for down payment
- enough funds for closing costs
Qualifying for a bank mortgage is more difficult in the Caribbean, however if you are a strong applicant, buying a highly marketable property, we can help. Talk to us today about our bank financing options!
