The advent of the Construction Stimulus Package has resulted in increased opportunities for potential homeowners looking to buy or build a house, and for existing homeowners seeking to extend their house or purchase another one. One of the most important decisions that you will have to make in your life is whether to buy or build a home.
The process of buying or building a home involves several stages. When building, one must first find the plot of land that fits within one’s budget and that can accommodate the house you want to build. Usually this involves a real estate agent and a lawyer. Your agent will help you find the plot of land which suits your needs. Your lawyer will ensure that the land is conveyed (sold) to you properly and all the requisite fees are paid to the government.
Secondly, your home should be designed by an architect and you need to ensure that you receive approval to build it from the Development Control Authority (DCA), as well as the necessary approvals from the Water and Sewage Company (WASCO) and Saint Lucia Electricity Services Limited (LUCELEC) for the supply of water and electricity to your home. Always ensure that your plans have received the requisite approvals before you proceed to build. Failure to do this will result in the construction being halted and the possibility of fines being imposed on you. After all of the above has been done, you will need to acquire the necessary financing.
Deciding on the bank or lending institution to finance the transaction is probably the most important part of the decision to purchase a home. The bank you choose will be with you for the next 25-35 years, so you need to gather all the relevant information regarding its requirements and policies and, most importantly, the rates that will apply to your mortgage/loan. I have done some of the work for you by providing a guide to the current rates being offered and what you need in order to qualify for a mortgage. But even before you take that step you must first consider the following:
1) What collateral (security) am I going to use? The Bank accepts many different forms of collateral (property, life insurance policies, cash etc.). The more collateral you pledge, the more likely it is the bank will grant you the loan, and you’re likely to have more bargaining power when negotiating for a lower interest rate and/or better repayment terms.
2) How much you can comfortably pay to the Bank? You should always think about the amount you can afford to pay each month while having to meet your other expenses (family, car payment, medical bills, groceries, entertainment, saving for a rainy day). Always aim to set aside some money each month for savings. If you can still save after paying your bills, you are in good shape.
3) Will you need alternative accommodation? While the house is under construction you will be required to make your monthly mortgage payments even though you are not living in the house yet. This means you may have to continue paying your house rent (if applicable) or whatever other accommodation costs you had before the mortgage, along with the mortgage. Always remember that unforeseen circumstances will inevitably arise, and being short on cash at this stage can be an unpleasant experience. Some banks do, however, offer a moratorium on loan payments for a few months during the construction phase to ease the burden on new homeowners, so you should always ask about the availability of this with your loans officer.
Now that you have done your homework, you are ready to meet a loans officer and advise him/her that you want to buy a house or build a new one. Which bank do you choose? Here is a list of the current rates being offered at the time of writing:
First Caribbean – 5.99%
Contact Ruphena Alleyne: 456-1000
Bank of Nova Scotia – 8% (can be reduced to 6.99% if refinancing from another bank). Contact Krystal Emmanuel: 456-2008.
Royal Bank of Canada/RBTT – 7.5%
Contact Lisa Monroque: 456-9200 or Alister Daniel: 457-6300
Financial Investment & Consultancy Services Ltd (FICS) – 7%.
Call 453-0225.
Capita Financial Services Inc – 8%
Contact Leona Cadette: 451-5626
Bank of Saint Lucia (BOSL) – 5% increasing to 8% (explained below).
Contact Analicia Edmunds: 456-6000
BOSL‘s mortgage rate starts off at 5% interest for the first year and increases by increments of 0.75% until it levels off at 8% (or after four years). There are other factors which the bank will take into account such as your credit history, your relationship with the bank and your security, all of which may slow down this rate of increase. Bank of Saint Lucia has a package called Complete for Life which offers customers a rate of 7.5% per annum once they agree to utilise two or more of the bank’s products or services. Your loans officer at BOSL would be happy to explain this to you in detail.
Ideally, banks require that mortgages be within the ages of 18-65 years and continuously employed for a period of 3 years. This means if you have been employed in your current job for less than 3 years, the time served in your previous job should make up that shortfall. As stated earlier, banks prefer that you have strong collateral as this reduces the risk in lending you money.
Most banks will require either a 5 or 10% deposit on your loan facility, meaning that if you take a loan for $100,000 you would be required to deposit either $5,000 or $10,000. This varies between banks but in some instances, if your collateral is strong enough, the bank may be willing to go below 5% or, even waive this altogether. Remember, the less money you put down as a deposit, the higher your monthly repayment will be. Your decision to buy or build a new home is something you will be proud of and cherish for many years, so ensure that you equip yourself with all the necessary information. That way you will find that this life-altering process becomes significantly easier.
David E.M. Du Boulay is the Managing Director of Innovative Concepts Ltd, a property development company which will soon be offering affordable homes for sale. Please visit www.buildyourdreamslu.com or contact david@buildyourdreamslu.com for more information.
