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.