Tag: property

Bank Financing In Cayman – Explained

In these last few weeks we’ve seen a significant uptick in new buyers, both locally and internationally, wanting to invest in their own piece of Cayman.  They may be keen to get their feet wet, but many are unfamiliar with buying property in the Cayman Islands and most importantly what to expect when it comes to their bank financing options.  It’s so important for new buyers to educate themselves on what their options are and what they “qualify” for before they start to look at properties.  This ensures there is no guessing on what they can afford, what they may or may not be entitled to, and guarantee a smooth Closing process when they fall in love with a property and make an Offer. Senior Manager of Personal lending at Butterfield Bank (Cayman) Limited, Amanda Bodden, was kind enough to answer some of the most common questions we are asked at Property Cayman.

If you have any additional questions don’t hesitate to reach out to us to learn more.  If we don’t know the answer, we will ensure you are connected with the right person to give you the facts ahead of making one of the biggest decisions in your lifetime – buying a property!

 

Q. How do the bank’s loan terms vary when buying a primary home, investment property & raw land?

The risk profile of an owner-occupied property mortgage is different than that of an investment property or raw land. A person’s primary residence represents a lower lending risk than an investment property which may become less profitable or even loss-making, or raw land which would not provide any income to offset its borrowing costs. Because of this, banks will generally require higher down payments and/or shorter repayment terms on investment properties or raw land than they would for your primary residence. You may also see higher interest rates charged for investment properties and raw land to reflect the higher risk lending.

 

Q. How do terms vary depending on the borrower’s age?

Typically, most banks in Cayman will lend up to age 65, which is the local retirement age. The borrower’s age will therefore be a factor that determines the maximum repayment term. Where a borrower does not have a mandated retirement age (for example, self-employed individuals) we are able to be a bit more flexible on the repayment term of a mortgage. As lenders we must understand the repayment source and verify that it is reasonably going to be available to service the debt over the agreed term. Lending to age 65 is not a strict policy, but it is important for us to understand when and how a mortgage will be repaid when we consider lending beyond retirement age.

 

 Q. What if any are the differences in lending policy & immigration status? 

 At Butterfield, our lending policy is the same for Caymanians, PR Status holders, RERC and work permit holders. We do not have different policies; we have one local resident policy that covers everyone. Our non-resident policy differs in that we will require a higher down payment and likely a shorter repayment term.

 

Q. What if any are the benefits of paying your mortgage bi-monthly instead of monthly?

 Paying bi-weekly accelerates your mortgage repayment. If you pay half of your normal monthly payment every two weeks you will essentially make 13 payments each year instead of 12. On a longer-term debt this can save quite a bit of interest and repay the debt earlier. At Butterfield we offer weekly, bi-weekly, and monthly payment options.


*The responses to these questions are specific to Butterfield Bank (Cayman) Limited and do not represent the opinions/ lending policies of other banks. Buyers are free to use any lender of their choosing when buying a property. 

Real Estate is Blind

Have you seen the Netflix show, ‘Love is Blind’?

The show’s premise is to find out whether love is truly blind, i.e. can you fall in love with someone and commit your life to them without ever seeing them? People on the show date each other in ‘pods’, aka behind a wall, and if they fall in love and get engaged they meet each other in person and decide whether to get married.

Crazy? Extreme? Impossible?

Well, without spoiling the show too much for those that haven’t watched it… it is crazy, it is extreme and IT IS POSSIBLE.


Now that we have adequately promoted Netflix and convinced you to spend 10 hours of your life binge watching this show, let us apply this premise to real estate.

 

Whilst we are all at home at the moment, with no physical showings permitted, there is no need to stop searching for the perfect home or investment.

There is a great deal you can be doing now when it comes to buying a house that will save you a lot of time later down the line.

BCE (before Covid-19 era) a bargain price, an ocean view or bedroom count may have been enough to entice buying a property. Now, during CE (Covid-19 era), the details behind a property and your property plan become even more important.

Hence: Real Estate is Blind. Well… 90% blind. 

 

There are lots of steps to buying a property that are often overlooked. With this in mind, we have put together a list of questions that will help get you started. The best part about it, all of these can and should be thought about before ever stepping foot in a property.

  • Your Team (agent, inspector, surveyor, appraiser, lawyer, banker, insurer, contractor – who makes up your team of professionals?)
  • Your Timing (Do you know when you want to pull the trigger? It’s important you educate yourself on the entire process AND your options along the way)
  • Your Timeline (How long are you investing in this property? and how does it fit into your overall property plan?
  • Your Budget (Have you been to the bank? Do you hold the requisite deposit and closing costs of as much as 10%?)
  • Your Family structure (Minimum bed count and square footage? Kids and grandkids or moving out soon?)
  • Your Lifestyle (Boating and beach walking or business entertaining? Or both?)
  • Your Location (Looking for peace & quiet or hustle & bustle? Commuting matters!)
  • Your Type (What are you looking for? What’s the purpose of the purchase? Does it suit the family and your investment parameters? Do you work from home? Rent when not in use (short term) or move in full time?)
    • House or Condo? (Want to manage it yourself or do you need a property manager? Ok to deal with strata fees? Is the strata healthy or can you anticipate special assessments?)
    • Existing or pre-construction? (older style ready now VS newer energy efficiency ready in 18 months?)
    • Land & Build? (What’s the zoning, planning, design, cost, timeline and process to construct?)
    • Buy & Renovate?  (What’s the cost, timeline and process to modernize and update a home? Can you virtual tour or stage it before starting?)
  • Your Exit Strategy (How do you rate the ultimate rent-ability and sell-abiltity?)

With the world in isolation, there has never been a better time to consider your own property journey. We are in this together and we are here to make sure you exhaust your options well in advance so when you do make a decision (either way), it’s a well-considered, informed and educated decision.

In Summary – Just like love and marriage, you need to know what you are signing up for and you shouldn’t buy a property based on the new living room furniture alone. Ignoring your property plan before buying can be a particularly costly mistake in the long run.

At whatever stage you are at, we are here to help you plan and guide you along your personal Cayman property journey. Please get in touch if you have any questions or feel like a candid chat.