Top 10 Pointers Securing a Mortgage

Buying a home and securing a mortgage can be a significant undertaking, especially for first-time buyers in Barbados. Here are the top 10 pointers for first-time buyers getting a mortgage in Barbados:

  1. Understand Your Budget:
    • Evaluate your financial situation and determine how much you can realistically afford. Consider your income, expenses, and potential future costs. When deciding how much you can afford to borrow, the banks in Barbados requires your monthly mortgage repayment be no more than 40% of your gross monthly salary. Therefore to buy a property for $600,000 Barbados dollars based on borrowing 95%, you would need to be earning at least $10,000 Barbados dollars per month.
  2. Research Mortgage Options:
    • Explore various mortgage options offered by different financial institutions in Barbados. Compare interest rates, terms, and conditions to find the best fit for your needs.
  1. Get Pre-Approved:
    • Obtain a mortgage pre-approval before house hunting. This not only strengthens your negotiating position but also gives you a clear understanding of the loan amount you qualify for.
  1. Save for a Down Payment:
    • Save for a down payment, which is typically required when purchasing a home. The amount may vary, so check with lenders and government programs that may assist first-time buyers.  We recommend setting aside 10-15% of the home’s cost for the down payment. Additionally, ensure you save extra funds to cover closing costs. Closing costs typically range from 2-7% of your home’s purchase price, shared between the buyer and seller. These costs are disbursed to third parties on the closing day to finalize the deal. Examples of fees include legal fees, comprising 1.5 to 2% of the purchase price + VAT, paid by both parties. Property Transfer Taxes of (2.5%) and Stamp Duty (1%) are usually the seller’s responsibility, but land tax is proportionally shared by both parties.
  1. Consider Government Programs:
    • Investigate any government programs or incentives for first-time homebuyers in Barbados. These programs may offer financial assistance, reduced interest rates, or other benefits. E.g. Home Ownership Providing Energy (HOPE) programme and First Home Grant initiative.
  1. Consult a Mortgage Advisor:
    • Seek advice from a mortgage broker (they charge about 1%, but can save you time and money) or financial consultant. They can guide you through the mortgage process, help you understand the terms, and provide personalized advice based on your financial situation.
  1. Check Your Credit Score:

The Two Consumer Credit Report Options available in Barbados.

  1. Free Credit Report, without Credit Score+
  2. Credit Report, with Credit Score ($30 BBD)
    • Review your credit score and take steps to improve it if necessary. A higher credit score can result in better mortgage terms and lower interest rates.
  1. Factor in Additional Costs:
    • Consider additional costs associated with buying a home, such as legal fees (1% – 2.5% plus 17.5% VAT), property taxes, insurance, and maintenance. Factor these into your budget to avoid surprises.
  1. Read and Understand the Terms:
    • Thoroughly read and understand the terms and conditions of the mortgage agreement. Pay attention to interest rates, repayment terms, and any penalties for early repayment.
  1. Plan for Future Expenses:
    • Anticipate future expenses and changes in your financial situation. Ensure that you can comfortably manage mortgage payments while accounting for potential increases in living costs or changes in income.

Remember, the mortgage process can be complex, so take your time, ask questions, and seek professional guidance when needed. Being well-informed and financially prepared will contribute to a smoother experience as a first-time buyer in Barbados

Most financial institutions require the following documentation:

  • Proof of identification such as Barbados ID or Passport
  • Confirmation of your residential address eg: utility bill
  • Job letter from your employer and a recent pay slip (Try not to change jobs when applying for a mortgage)
  • If self-employed, financial statements for the company for 3 years
  • Bank statements, especially for new customers
  • Barbados property sales valuation
  • If you are building on the property, or renovating, a contractor’s estimate
  • An agreement of property sale from the vendor selling the property (where applicable)

Navigating the mortgage process can be complex, so it’s essential to work closely with your lender, real estate agent, and other professionals to ensure a smooth and successful transaction.

Lending institutions typically require mortgages to be repaid before the borrower reaches 70 years old. Mortgage payments and terms are calculated based on the borrower’s age and the time remaining until they turn 70. Flexibility exists with most institutions, and consulting a mortgage finance specialist is advisable to determine the loan term.

Barbados has six commercial banks, each offering various mortgage options. Nationality is not a requirement to obtain a mortgage in Barbados. Both Royal Bank of Canada and CIBC offer US Currency mortgages.  Separate requirements will apply.

Mortgages in Barbados can be used to purchase existing properties, land, new construction, or for property renovations.