The first step in your home purchasing journey is to secure your financing approvals – even prior to beginning your property search. This will save you time and headache when you find your perfect property match.
When it comes to financing, your lender will need to take multiple things into consideration, many of which are the same in markets around the world. Cayman does have a few nuances and different terminology than some markets that we’ll explore here.
Mortgage Terms and Rates
Depending on the lending institution you choose, there are several factors that can impact your debt service ratio calculations; the down payment percentage required and the loan repayment terms. These include: your immigration status (overseas buyer, Caymanian, Permanent Resident, or a work permit holder); profession, age, income, current debt, and assets that could be used as collateral.
In the Cayman Islands, many purchases have variable rate mortgages, and a 10-to-15-year term is considered normal. Although some lenders do offer up to 30-year terms and fixed-rate options. Williams2 can advise which institution will meet your needs best and can help you negotiate more effectively.
Lender down payment requirements vary and can be as little as 5% or as much as 40% in some cases. Many lenders do not charge annual over-payment penalties. With the Cayman Islands dollar being tied to the US dollar, interest rates vary from 1 to even 3 percent above the prime rate. The prime rate is used by the U.S. Federal Reserve and is the benchmark used by financial intuitions for home equity lines of credit and credit card rates.
Outside of securing the loan, there are a few other conditions home buyers need to be aware of and expenses to plan for.
While Cayman doesn’t collect income tax from its residents, it uses a fee-based system of indirect taxation to raise government funds. This includes duty fees on imports, work permits and property purchases.
The duty for property purchases it at 7.5% paid by the buyer – up front to the government – on the sales price minus chattels. Deductions from the value are made to account for non-real estate chattels in the home, such as furnishing and appliances. Many properties in Cayman come fully furnished so the value of the items in the home would reduce the amount of duty.
The exemptions for first time Caymanian buyers include a lower 1% duty fee charged on mortgages of less than CI$300,000 and 1.5% on CI$300,000 or higher.
Legal Conveyancing Fees
Also known as a property transfer, the bank will require and in some cases arrange an attorney for you. A fee of 1% of the property value is the standard fee for the service.
In Cayman, a strata plan is the common way condos and shared property complexes are managed. The plans vary in amount so this needs to be taken into consideration during the purchase period. The fees are many times included in the home listings and your relator will check all of the documentation.
And did you know that house transactions in Cayman require a ‘market value’ report? This is usually done by the purchaser but it is required by the local banks for the buyer to secure a mortgage. Getting it right is essential. Wiliams2 provides free valuations for sellers so they can get the home sold as quickly as possible, and to make the process simple for the buyer.
Outstanding Bills & Liens
Buyers need to make sure there aren’t any outstanding debts associated with the new property. The conveyancing activity should identify any outstanding debts but it is worth checking with the utility companies too.
Although not mandatory by law, it is highly recommended that you have a home inspection carried out when purchasing a home. A Home Inspection conducted by a licensed home inspector will include a full examination which will consist of structural components such as foundations, floors, walls, ceilings, hurricane straps and roof. They will also check all interior components – doors, windows and all appliances, testing the safety and functionality of all items. A licensed home inspector is also qualified to inspect the mechanical, electrical and plumbing systems of the home. An inspection report is then provided, noting all findings, and actions for any required remediation