There are generally 2 ways to go for your Caribbean mortgage options. A Conventional mortgage, or typical bank financing, is the more affordable option. Private financing is the more costly, but quicker and easier option. Which mortgage is best for you and your circumstances?
When most people need a mortgage, the first place they think of is a bank. The Caribbean is no different, a number of banks operate in the region and do lend on local real estate. Mortgage rates are not as cheap as North America, and qualification is more difficult, however it is still a good option for those who have the time and ability to get approved.
The downside of using a bank is generally the time it takes to get approved, assuming you can. You may be used to getting a mortgage approved in a week, however the process in most of the Caribbean is quite different, often taking months. This can be a difficult time frame for most buyers who would generally like to close within a couple of months.
Qualification, as mentioned, can also be more difficult than clients experience at home. For many self employed clients who write down their incomes, showing enough income on paper will be difficult.
Private mortgages are much more common for buying real estate in the Caribbean than they would be in North America or Europe, where liquidity and options are plentiful. Private mortgages offer much easier qualification (based primarily on equity in the property), than conventional loans, but you pay a premium on the rate. Mortgage rates for private financing is usually 2-4 points higher than what you would pay at the bank.
The benefits of using a private mortgage are pretty obvious; we can close them in weeks, not months and qualification is not based on income. Often clients will start with a private mortgage and once their property is able to show a track record of rental income, move the mortgage over to the bank where qualification will now be easier with the added rental income.
The downsides to a private mortgage are just as obvious; the cost of funds and the amount of equity needed in the deal. Rates usually start in the 8% range, plus the added fees for arranging the mortgage. You will also be required to have 50% equity in the property versus the bank, which will usually only require 30%.
For all of your financing options in the Caribbean, talk to a mortgage expert today. We will walk you through your options, costs and process to assist you in making an informed decision.