5 Mistakes People Make When Thinking About Financing in the Turks & Caicos
1. They think it is the same as home.
While you can get financing here locally for a purchase, your debt to equity ratio will likely be 50-65%. So you are going to need to put down a larger down payment than you would in the US or Canada.
2. They don’t start talking to the Banks early.
The commercial bank approval process is a slow one. Best to start talking to the Banks early so you can get comfortable with the process and start providing the information you need to get approved. Doing this should also help you shorten the conditional period on your offer so a seller is more likely to accept it.
3. They don’t consider bridge financing.
We have a lot of private lenders here in the Turks & Caicos and the reason they operate successfully is because the commercial banks take so long to approve loans. While their interest rates are higher than the commercial banks (7-8%) they can make a swift decision and give you a sold pre-approval before your offer, usually subject to a valuation on the property to make sure they are not loaning more than 50% of the value. While these higher interest rates put off some borrowers they should be seen as bridge financing, to be replaced by a commercial loan later on. By having this approval ready to go, you better your chances of being successful in your offer and the small increase in interest for a year or two is marginal against losing the property in the first place.
4. They don’t think about refinancing later.
If you purchase with cash you still have the option of refinancing at a later date. If you are making a currency conversion, such as Canadian buyers, you may want to borrow against your purchase later on to offset currency exchange risk. Or, having secured the property at the price you want, you want to work with the Bank to secure your financing without the pressure of closing deadlines.
5. They don’t consider all of the fees.
Don’t forget to include in your budget 3-4% fees on the loan value, this includes the Bank’s fee, the Bank’s lawyers fee and the Stamp Duty fee on the registration of the loan.
Learn more about financing your dream investment property in Turks and Caicos by. watching the videe below: