KweYol have considerable experience in the management and organisation for buying property in the Caribbean financial guidance. Our agents are knowledgeable of all the financial aspects required for the purchase of property in the Caribbean. If you require funding to purchase your property we can advise of the most efficient methods of achieving this, and also arrange highly preferential exchange rates for the currency you require through our network of Financial specialists. Taxation regarding your Caribbean property may also be an issue which requires comprehensive planning, again we can advise through our Financial specialists.
5 financial tips to note when when buying property in the Caribbean
Funding the Purchase
There are various options available which can be utilized to fund a purchase, and we are able to advise and arrange, depending upon your own particular circumstances. The generally accepted options are :
Obtain a mortgage from a UK or USA lender when buying property in the Caribbean.
Lending criteria for this type of property purchase is on the cautious side, and will usually require a substantial deposit with higher rates than normal. Arranging finance in the UK or USA used to be difficult when it was for the purchase of a Caribbean property, however this has changed in the last few years and the good news is that more and more UK and USA lenders are offering mortgages to buy properties abroad, particularly in the Caribbean. We can arrange secured loans for those who wish to release equity without remortgaging. This is useful if you have redemption charges to pay on your current mortgage or if you have damaged your credit rating in some way since getting a mortgage.
Obtain a mortgage from the Caribbean country in which you are purchasing property.
There are banks and other financial companies in most Caribbean countries that will lend money when buying property in the Caribbean country you are purchasing. They will secure the loan either on a property in your own country or on the new property itself. As a general rule the normal limit of lending is approximately 60% of the purchase price, however this will vary depending upon the particular country.
There are both advantages and disadvantages in obtaining a mortgage in the foreign country instead of the UK, USA or CANADA. With a mortgage abroad, there may be high set-up costs, $1,000-$2,000 is not unusual. You may also have to pay taxes and fees to the country where the property is located, and these can be up to 2.5% of the value of the mortgage. Legal fees are 3-5% of the purchase cost. One advantage is that you will pay local interest rates, which are normally lower than those in the UK, USA and CANADA. Most Caribbean countries are open to investments, so you may get loads of tax breaks.
Obtain the release of equity from your UK, USA or CANADA property in order to fund a cash purchase.
Property prices in the UK, USA and CANADA have increased so much recently that many people are sitting on huge amounts of equity. Presently it is a popular option to remortgage in the UK, USA and CANADA, and the cash released can be sufficient for many people to buy a property in the Caribbean. By remortgaging it is possible to raise capital, either with an existing lender or a new one. This will of course result in an increase of your monthly mortgage payments. Many of our clients have found their existing lender will allow them to remortgage their UK, USA or CANADA property in order to raise more capital, but this also results in higher rates of interest.
Obviously the exchange rate of the required currency is highly important for this option, and it should be carefully considered when to purchase the currency. Buying property in the Caribbean is normally easier if you can do it without a mortgage. This is particularly true if your purchase is intended as an investment property since continental renting laws are biased in favour of tenants and eviction can be difficult and lengthy.
An often neglected consideration during the purchase procedure is the exchange rate of the currency in which the property is to be bought. This is susceptible to market forces and can fluctuate significantly enough to cause large changes in the Sterling amount that will have to be paid for the property purchase, unlike USD exchange rate that is fairly stable in the Caribbean. When buying a property in the Caribbean, you will know the price of the property in the local currency but you will not know the actual Sterling or USD cost until you buy all of the currency to pay for it. This means that the property could either cost you more than you had planned (if the local currency strengthens) or the property could become cheaper (if Sterling strengthens). Recently Sterling has fluctuated more than 10% against the Euro and the $US within a matter of months, so this does deserve careful consideration. On the basis that you are buying a property and not speculating on the currency markets, it is worth fixing the exchange rate for all of your future stage payments to the agent or developer.
KweYol Caribbean Real Estate Agents have experience of these considerations and can advise accordingly.
Our recommended option to overcome exchange rate fluctuations is to secure the rate with a Forward Contract. This mechanism is especially useful when market conditions are currently advantageous, but the currency is not actually needed until a future date.
Buying Property in the Caribbean Off Plan
The situation can become more complex when purchasing a new property off plan. This will typically involve multiple stage payments over periods of up to 18 months or longer. Due to only guide dates being given for completion of each stage, a series of Forward Time Option contracts could secure the rates right up until the final completion, whist remaining flexible in order to accommodate unspecific dates.
If you are considering the buying property in the Caribbean and would like to discuss how we can help to safeguard your interests – or simply save you money by arranging a better deal than your high street bank – please contact us as soon as possible. Don’t make an expensive mistake !!
There is no doubt your tax situation will be affected as a result of your property purchase in a Caribbean country. Expert advice should be sought from a professional who can specifically offer guidance on issues such as : liability to taxation in the UK, USA and CANADA, capital gains tax, inheritance tax, foreign taxation, and the double taxation implications.
As an example there are different inheritance tax rules for properties overseas. In the UK, inheritance tax starts on assets worth more than £250,000, but in some countries the threshold starts at £10,000. Transfers between husband and wife are exempt from inheritance tax in the UK, but may be taxed in the new country.
Many European countries prevent homeowners from leaving property solely to their spouse, but force them to divvy it up between children as well. This can potentially cause problems for those in second or third marriages, where the current spouse could be forced to sell their home. Even writing a Will may not be able to change this, although it could give the surviving spouse the right to continue living in the property.
We have established long term contacts in all aspects of Caribbean property finance, and can utilize these for your benefit. Please contact us to discuss your own individual requirements, and we can advise and arrange the best options available to you.
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