Mortgage interest rates in Barbados continue to be driven down with much competition in the lending sector. However, it is the terms and conditions that determine the most suitable product for the prospective borrower. There are several lending institutions in Barbados, mainly commercial banks and credit unions. Getting the right mortgage for the borrower is a fundamental part of the property purchasing process.

Who’s involved?

The mortgage process can be a daunting experience and involves several players including financial advisors, lending institutions, lawyers, real estate agents, valuers and insurance companies. In many cases, the lending institution also performs the roll as the financial advisor.

Financial Advisor - Choose your financial advisor wisely. Make sure the person in whom you place your financial trust has the knowledge and experience as the wrong decision can be a costly exercise.

Attorney-at-law - You will need a good lawyer to deal with all your legal work and who will work closely with your lending institution’s lawyers.

Lending Institution - Most lenders have very capable mortgage advisors. If you choose to go directly to the lender, make sure you ask plenty questions, everything! Make sure you understand clearly what you are putting yourself into. Failure to do so could be a costly experience.

Real Estate Agent - Most property purchasers will engage the services of a real estate agent. Make sure you choose a professional Real Estate Agent who has the knowledge and experience to guide you through the process and give you good advice.

Valuer - All lending institutions will require a valuation report on the property. This is to ensure their interest is protected. Many lenders have a panel of valuers for you to choose from but some will allow the applicant to make their own direct contact.

Insurance - Advice on insurance can be provided by either an insurance company, broker or agent. All lenders will require evidence of buildings insurance.

What costs are involved?

It is very important that the prospective borrower is aware of the costs involved in securing a mortgage. Here is a general guide:

Mortgage costs - Mortgage costs can differ from one borrower to another depending on a number of variables such as, the terms and conditions.

Legal costs – Attorney fees will be charged to cover legal work done pertaining to the mortgage and the conveyance. Legal fees are regulated by the Barbados Legal Profession. Request a quote.

Lender’s fees – There are many variables depending on the terms and conditions associated with the loan. Fees could include negotiation fees, administrative fees and a commitment fee.

Valuation costs – Since fees vary from one valuer to another, the cost of a mortgage valuation report varies. It is best, therefore, to get a quotation before engaging the services of a valuer. You may wish to get more than one quotation.

Mortgage broker’s fees –Mortgage broker’s fees are usually 1% of the loan secured and payable on procuring the offer letter from the lender.

Insurance costs – Insurance on buildings and life insurance is required in most mortgage transactions. Costs vary according to individual circumstances.

Real Estate Agent fees – There are NO real estate agent fees incurred by the purchaser. Agent fees are payable by the seller of the property.

What’s required?

Basic documentation from lending institutions for the application of a mortgage include:

If employed,

• Recent job letter from your employer
• Recent pay slip
• Proof of your address, for example, a recent utility bill that was mailed to you
• Recent statement from your bank or credit union
• Your National Identification Card or passport
• A recent Valuation report on the property
• A copy of the plot plan
• A letter from the vendor of the property

If self-employed,

• Financial Statements for the last two years
• Bank Statement for the last six months
• Your Business Registration

Collateral required

• First Legal Mortgage stamped to cover the loan amount
• Mortgage Indemnity Insurance
• Assignment of Homeowners Insurance for the value of the property
• Assignment of Life/Term/Creditor Life Insurance for loan amount