Thinking of taking out a mortgage to finance your Caribbean property purchase but not sure who to turn to and how to go about it? We talked to the experts at Royal Bank of Canada to get the lowdown on the ins and outs of mortgages for non-resident buyers eyeing up a second home in the sun.
Royal Bank of Canada (RBC) Caribbean Mortgages for Non-Resident Property Buyers
Applying for financing for a property purchase in your home country can sometimes feel like a confusing process. So many factors to consider, so many options to weigh up. The choices are many and varied, sometimes bewilderingly so. Now, imagine going through that process to finance your dream home in the Caribbean… Sounds daunting? Perhaps you didn’t even think it was possible for a non-resident to obtain a mortgage for a property purchase in the region? Well, contrary to popular misconception, it is possible to obtain a mortgage to buy a second home in the sun and the process does not have to be confusing or complex.
We turned to the experts at Canada’s largest bank, the Royal Bank of Canada, to get the lowdown on mortgages for non-residents investing in a second home in the Caribbean. As one of the world’s top-20 largest banks with 16 million customers worldwide and a presence in 40 countries worldwide, including 17 countries across the Caribbean, who better to demystify the options and process?
To find out more, we spoke to Trinidad & Tobago-based Resha Seeram Singh, a Senior Product Manager responsible for Home Equity Financing & Personal Lending for RBC Financial (Caribbean). According to Resha, RBC offers mortgages to non-Caribbean nationals investing in real estate in certain Caribbean islands. “RBC currently offers mortgages for clients from countries including the USA, Canada, UK and the Netherlands purchasing property in The Bahamas, Cayman Islands, Turks & Caicos, Barbados, Trinidad & Tobago, Aruba, Bonaire, Curaçao, St Maarten and Saba,” Resha explains. “We also finance properties in the Eastern Caribbean on a selective basis,” she says. According to Resha, RBC’s Caribbean mortgages for non-residents are provided to clients meeting RBC’s minimum underwriting criteria (including income, net worth and credit score) in order “to build, purchase or improve an owner-occupied residence. We focus on financing the acquisition of second homes and vacation homes.” “Buyers can borrow up to US $2,000,000 for RBC’s standard product,” she adds. How large a down payment do buyers need? “Typically 30% but we may require a larger down payment depending on the nature of the property. The facility can be amortized for up to 15 years,” Resha says. “Origination fees vary from country to country, but typically vary from 0.50% to 2% of the principal amount.”
Caribbean mortgages for non-residents
Applying for a Caribbean Mortgage
So, at what stage in the property buying process should buyers seek advice on mortgages? We asked Shane Cummins, RBC’s Business Development Manager for the Southern Caribbean. Shane believes it’s best to get advice on mortgages right at the beginning of the property search process. “Knowing what amount you can pre-qualify for will allow you to shop for a property with confidence,” he says. “The pre-qualification amount is valid for up to six months and done at no cost or obligation to the client.” “You can also take the opportunity at this stage to get advice on the other factors you need to consider and the process involved in buying a home in the Caribbean,” he adds. “Our professionals are equipped with this information and can take you through step-by-step in the journey to property ownership.”
Factors to Consider
We asked Shane what other factors buyers should consider when seeking financing for a property in the Caribbean. “We always recommend that you seek expert advice,” he replies. “A mortgage is a long-term commitment and there are many factors to be considered.” Shane suggests that buyers should ask themselves some basic questions.
Firstly, how much can I afford? “Our professionals will take a look at your debt serviceability to ensure that you can comfortably afford the investment. RBC works with clients to ensure that they have the capacity and capability to pay off their debt (debt serviceability). We examine your total debt service ratio, which is the ratio of your total monthly debt obligations to gross income to ensure that sufficient funds are available for other monthly expenses. A client can also make lump sum payments in accordance with terms and conditions of his or her contract.”
Secondly, what are the other costs involved? “There are other costs to consider in addition to the down payment. Closing costs such as legal fees, valuation fees, and the bank’s commitment/administration fee should also be considered.”
Thirdly, are there any tax implications? “We strongly recommend that you enlist the help of your tax professional or a tax professional in the jurisdiction of the property purchase to determine this upfront.”
Fourthly, are there any other restrictions? “In jurisdictions with exchange control laws, purchasers need to carefully consider their medium to long term liquidity needs, as there are some restrictions on the flow of funds. It is, therefore, essential that persons seek relevant advice in order to make an informed decision. Our Private Bankers can guide clients through this process and propose solutions suited to their needs and circumstances.”
Shane offers some words of advice to would-be borrowers. “Take your time,” he says. “There are lots of factors to consider when buying a home, and you can often benefit by searching in different areas and neighborhoods before you make a final decision. Your realtor is a key partner in this process. Secondly, apart from the mortgage payment consider other factors that will impact your income on a monthly or annual basis including utility bills, home repairs, property tax (if applicable), property maintenance, general insurance, and property management.”
Caribbean mortgages for non-residents
Why Come to RBC for a Caribbean Mortgage?
Robert Pantry, RBC VP Business Development, Northern Caribbean, explains why you should come to RBC for a Caribbean mortgage. “RBC offers professionalism, experience and stability”, Robert explains. “We are well aware that investors and high net worth individuals are looking for bespoke service from knowledgeable and respected banking partners wherever they do business across the globe,” he says. “RBC is a Canadian leader with global strength and recognized financial stability. We are the largest bank in Canada based on market capitalization. Our global footprint also extends to the Caribbean. We have operated here for over 100 years, so we understand this part of the world very well.” Robert also believes that RBC has a deep understanding of the needs of non-resident investors in the Caribbean. “We are very acquainted with the needs of international real estate investors and have designed a mortgage product to meet those needs,” he explains. “We realize that there is not a “one size fits all” solution. Therefore, we work closely with our clients in advising and guiding them through all the questions that they might have about this important investment and helping them decide how to balance mortgage financing with other financial goals. The great thing about RBC is that we operate as one bank across the globe. So if our clients also need advice on other investment asset classes, we can leverage the strength of our RBC International Wealth Management platform to provide tailored discretionary or advisory investment solutions right here in the Caribbean.”
So, with advice from the experts, taking out a mortgage to finance the purchase of a second home in the Caribbean need not be so complex and daunting.
More Information on Applying for Mortgage for a Caribbean Property
For more information, please visit www.rbc.com/caribbean.
This article was originally published in Issue 7 of The Caribbean Property Investor magazine. To read the full issue, click here.