There are basically two types of property purchasers - those who can pay cash and those who need to borrow!

If you belong to the former category then click over to the next page, but if you need to borrow, then this article could save you thousands of dollars, endless hours of frustration and help you secure the home of your dreams.

There are some basic ground rules to understanding the mortgage process in the Caribbean and it is best to accept them from the outset or you will be quickly stressed. That beautiful laid back easy-going lifestyle is not an apparition reserved solely for the tourist, it is a way of life and it is as much a part of everyday business as it is in the restaurant, rum shop or supermarket. Nothing moves quickly in the Caribbean, and certainly not banking, conveyancing and house purchase. Of course, it will get better, but for today's prospective purchaser looking for a quick turnaround, you will be very disappointed and it may be more a question of when you will get the mortgage rather than whether you will get it!

The Caribbean mortgage market lacks the sophistication, range of products and quality customer service available in the mature mortgage markets of North America and Europe. Mortgage funds for overseas buyers are thin on the ground and quality independent advice even thinner. Some prospective borrowers may be reluctant to pay a mortgage broker's engagement fee for a service they feel they could do themselves, but the path is full of gremlins and my advice is simple... proceed with caution! Trying to place a mortgage from thousands of miles away is full of pitfalls, not least your expensive phone calls, essential visit and prolonged processing period.

Mortgage lenders in the Caribbean are normally banks, insurance companies and finance houses. But for overseas purchasers the current options are limited and the need for local independent financial advice is paramount.

The decision to purchase property in the Caribbean is essentially one of either investment or lifestyle, in some cases both. The decision to borrow funds for that purchase is usually one of need. That means prospective purchasers have to ensure the commitment is viable and within their budget.

Buying property in the region is an expensive process, much more expensive than it needs to be, but that won't change overnight. The purchase certainly can't be done on a shoestring or tight budget, and unless you have adequate savings to cover all your costs from the outset, you won't pass the risk assessment of the lender. That means you have to have at least 30% of the purchase price, and sufficient funds to pay the legal fees and all the associated purchase costs.

Once you have passed the acid test of risk analysis, it is really a question of finding the right product to suit your needs. The current most widely used mortgage product for overseas purchasers is a US$ mortgage, a product that takes advantage of the low US$ LIBOR rate. However, it is not available in all jurisdictions and it is best to check with your mortgage broker before committing to a purchase. Indeed it would be foolhardy to commit to any purchase without your mortgage being formally approved.

The capital and interest repayment method remains the most used product, although interest-only and fixed rate products have started to become available. The general terms and conditions of the US$ products are maximum repayment term 15 years, maximum loan-to-value 75% and borrowers must repay in US$. All other normal lending requirements apply.

Interest rates of approx. 7.5% are available and the lender usually charges an administration fee of at typically 1% of the amount borrowed.

For illustration purposes that means someone purchasing at US$400,000 and borrowing US$300,000 (75%) over 15 years would be required to make monthly repayments of US$2295.

The overseas buyer may also wish to purchase through a single-asset property-holding company for tax efficiency, both in terms of income tax if the property generates a taxable rental income, and secondly in relation to property transfer tax when selling. This arrangement is possible, although buyers should ensure their tax liability in their own domicile is not adversely affected when using this option.

The borrowing process may not be a minefield, but it does present some major challenges, and unless you are an expert in the financial services field, you would be well advised to seek the services of an independent mortgage broker from the outset.

Continue to - General information on mortgages for non caribbean residents