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Financial Information
A mortgage is generally a long–term loan primarily for the purpose
of building a house. For many, this will be the biggest financial
investment of their lives, but it need not to be the most
complicated or stressful.
Look Ahead
Before you undertake a mortgage, review your finances and plans to
determine whether you can afford such a commitment at that time, It
is unwise to rush into a mortgage with little or no savings or with
high monthly expenses, because of the costs involved with obtaining
mortgage financing. It is unlikely that a bank will lend you 100 per
cent of the amount you need to construct your house.
You will be required to demonstrate your ability to adequately meet
your mortgage payments. You should therefore factor in such things
as the stability of your present job, your medical or other family
needs, tuition costs, etc., when determining how large a mortgage to
assume.
Ensure that your past and present credit ratings are good. If you
are behind on any bank payments, make every effort to bring them up
to date before applying for a mortgage. Take a realistic look at
what you can afford. Finding the down payment is one thing;
maintaining a mortgage along with your other monthly obligations is
another matter.
Requirements
Before your mortgage application is approved, you will need the
following:
Professional appraisal of the prospective property
If buying a house, a deposit of 30% of the selling price or the
appraised value, whichever is lower, OR, if building a house,
deposit of 20% of the cost of construction. The value of any land
you own may be considered part of this enquiry
If buying a house, insurance to cover the value of the property, OR,
if building a house, coverage during the period of construction and
regular insurance after construction
Life insurance of the principle borrower (s)
If buying, purchase agreement
Personal identification
Proof of citizenship
If building, DCA-approved plans
If building, building permit
If building, quantity surveyor’s report (i.e construction cost
verification)
Builder’s contract identifying cost of various stages of
construction
The Application
During the formal loan application process with your bank, you will
be required to verify your income, employment, and down-payment
funds. You will have to provide additional information such as your
age, address, dependents, assets and liabilities, monthly and
projected expenses etc., so that your bankers can fully assess your
application. At all times, be honest. Your bankers will verify the
information you provide, so falsehoods will only hurt your chances
of approval. Once all your documents are in order, approval should
come within a few days.
Fees
There are one-time fees involved in acquiring a mortgage facility.
These include:
Down payment: Banks require a deposit of the cost when granting a
mortgage.
Legal fees: The bank will register a “Charge & Caution” over the
property for the amount and duration of the loan. These documents
represent the security that the bank will hold for the loan. Fees
include government stamp duty and lawyer charges.
Negotiation Fee: Banks charge a lending or finance fee for granting
the mortgage facility. This is usually 1 per cent of the amount
borrowed.
Appraisal Fee: This is a fee paid to the professional valuer for the
property appraisal.
Interest Rate: Generally ranges from 11 to 12.5% per annum on a
reducing balance basis
If you are a non-national, you will be required to obtain an “alien
land-holding license”, which takes approximately six months to
obtain. Your attorney will apply for this license on your behalf.
You will also be required to pay a 3% non=citizen government tax (3%
of the loan value). To grant you the loan, your banker must obtain
approval from the Ministry of Finance on your behalf.
If you have exhausted every source for additional cash and are still
short, talk to your banker. It is possible you have other assets you
may not have considered. You may also want to consider other options
– a less expensive property. Alternate savings set aside for other
purposes, or plans postponed for a year or two.
Security
Once your loan is approved, the bank will issue you a commitment
letter stating the terns and conditions of the facility. If you
accept, the bank can then proceed to register the “Charge & Caution”
over your unencumbered freehold property.
Insurance: For the duration of the mortgage, you will be required to
maintain insurance coverage up to the value of the property.
Life Insurance: (required by some banks) This is additional security
so that, in the event of your death, the total amount due on your
loan will be repaid by the insurance company.
Salary Assignment/Deduction: Written authorization so that your
employer can deduct your monthly payments from your salary or remit
your salary directly to the bank.
Repayments: You will be given a maximum of 25 years to repay your
mortgage facility. Monthly repayment of your mortgage should not
exceed one third of your gross salary. Your total debt savings (i.e.
your mortgage payments, other debts, and obligations) should not
exceed 40% of your income.
You will be expected to repay the principle and interest monthly to
your bank, with payments commencing one month after draw down of the
loan facility. If building, only the interest payment will be
required during construction. It is important that you make your
full payments on time each month to keep your loan in good standing.
Late payments result in your paying more in interest over the life
of the mortgage.
Take advantage of all your bank’s prepayment options by settling
your mortgage earlier than indicated in your mortgage agreement.
This will significantly reduce the amount of interest you pay
overall. Should any unforeseen change in your circumstances affect
your repayment schedule, you should immediately advise your bankers.
Most lenders will review your financial position to determine what,
if anything, can be done to keep your mortgage in good standing
until it can be regularized.
Cost Overruns: Always try to avoid changes to your original
architectural plan once construction begins, as this can result in
significant – and undesirable – extra costs. Although buying or
building a house is always a challenge, you will find that banks are
happy and ready to assist you in making the most appropriate
decisions. In the final analysis, you will have much to show for
your monthly payments; you will finally own your “piece of the
rock!”
Special Thanks to ABIB.
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Whilst
Every Care is taken, prices and details contained within the Antigua
Estate Website, marketing material and correspondence are subject to
change and Antigua Estates can take no responsibility for entries,
omissions or errors for any claim made therein.
