Buying Land in Barbados – Four Initial Costs

Hi There!

Welcome to today’s blog post detailing the initial costs of purchasing land in Barbados. If you have not yet reached the stage of contacting an advert for a plot of land, our post Five Places to Look for Properties in Barbados provides resources for your potential purchase.

Having commenced this journey, you should have received an offer letter from your vendor or realtor and chose the best lending agency for you. With the offer letter in hand, along with the plot plan and you are ready to get going!

Personnel at the lending agency should have informed you about the costs which you will incur if you decide to purchase a plot of land. The list below outlines the four initial costs of buying land in Barbados.

The expenses detailed are not exhaustive, but provide an idea of some of the biggest expenses you are likely to incur in the land purchase stage.

Initial Costs

• Deposit Fee
• Mortgage Fee (if you are using a loan facility to purchase your land plot)
• Land Valuation Costs
• Legal Fees

Deposit Fee

This first fee is also referred to as a commitment fee or a share pledge fee at your local credit union.

Most lending agencies will provide financing of 80% to 90% for the purchase price on a parcel of land. Therefore, you will be required take a deposit of at least 10% of the purchase price.

For example, if the purchase price for a piece of land is $100,000, your deposit fee would then be $10,000.00.  (100,000*0.10 = $10,000).

Where will this come from you ask? Well, there are several options available to you.

From Your Savings

Do you remember in an earlier blog post I mentioned the benefits of saving some of your income?  The money accumulated from savings can be used or aid in paying your deposit fee. This is not at all impossible but may be difficult to achieve. However, with some planning it is attainable.

For my husband and I, we did not go this route. We acquired some of the deposit for the land but we did not have all. As a result of this, we opted for the second option, which follows.

What if I don’t have all the money, should I still proceed?

Do not be afraid of continuing the purchase without being able to use your savings for the deposit fee. The aim is to be somewhat prepared in the event that we do not have all the savings.

The lending agency will give you the option of taking out a small loan. This loan will assist you in meeting the shortfall you have on the deposit.

Please bear in mind that the small loan will incur additional fees. Some fees which come to mind are stamp duty and negotiation fees. This depends on the terms and the conditions of the bank/credit union and the size of the loan. Ask your account representative for more information on this.

We made a share pledge to cover the shortfall we had in savings to meet our required deposit amount.

Ask a Family Member

You can also ask a member of your family to help you with the required deposit or for the difference needed to add to what you already have saved.

Mortgage Fee

Secondly, the Mortgage fee is charged by the lending agency for preparation of your mortgage documents and other administrative work. You can consider this to be a negotiation fee, similar to what is paid on a normal loan.

The mortgage fee varies from lending agency to lending agency. Rates can start from 0.2% to 0.75% on the amount borrowed.

For example, if you borrow $150,000 (to cover land costs and legal fees), based a percentage of 0.50%, the mortgage fee would be calculated at a cost of 150,000*0.50% = $750.00.

The fee can be added to the mortgage costs, once it is within your borrowing threshold or can be paid out of pocket.

Land Valuation Costs

The third cost you can incur is the cost of the Valuation Report. The bank or credit union will request this report on the parcel of land. The report should be done by an independent appraiser, who has knowledge and experience in this field.

The purpose of this to determine whether:

1. The current asking price of the land is close to the current market value of other plots of land in the area
2. How much equity will be held land by the lending agency, that is the (market value compared to the asking price)

Who chooses the valuer?

You will choose the appraisal company from a list of the lending agency’s approved valuers/consultants.

After the company is chosen, the valuation report can be done for as low as $220BDS, exclusive of Value Added Tax (VAT). At the time of posting this article in 2021, VAT was 17.5%. Using the lowest quote received of $220.00 and VAT of $38.50BDS (220*17.5%) this gives a total of $258.50BDS.

We called all of the appraisers from the list we were provided, this was done to compare prices. We settled on a valuer and made the call. The valuer gave us a time frame of TWO weeks in which the valuation report would be ready, it really took about THREE weeks in total.

LAND TAX BILL

The valuers requested that we email the PLOT PLAN of the land and the latest LAND TAX BILL to them to begin the process.

You may be lucky and not have to take this additional step in your journey. If you are buying from a developer, a land valuation may have been done recently. You can simply request a copy of this from the vendor to give the lending agency. Keep in mind you maybe charged for this valuation. Remember, this is at the vendor’s discretion and the report should come from an approved valuer (one whom your bank/credit union will accept).

Lawyer Fees & Other Associated Fees

We had no idea what the lawyer fees would be when we began the process of buying land in Barbados. We asked an account representative at the credit union if she would be able to give us a ballpark estimate for the lawyer fees. The representative provided an estimate of 5 to 6 per cent of the total mortgage.

Our mortgage was $148,900BDS, a 5 percent estimate would give us $7,445BDS. Whereas, a 6 percent estimate would give us $8,934.00BDS.  

Our lawyer fees came to $7,033.85 BDS as seen below, titled (1) Legal fees on Purchase and Mortgage. This works out to about 4.75% of the mortgage amount of $148,900.00.

What we paid

As seen below the legal fees includes the fees for the mortgagee (lending agency) and the purchaser/borrower (or the mortgagor) The purchaser pays BOTH amounts. Usually, the purchaser pays less in legal fees if they use the same attorney that the lending agency is using.

Additional costs associated with the purchase of land in Barbados will be highlighted in the following subsequent post. What we spent to purchase land in Barbados.

Conclusion

I hope you were able to glean some insight to the initial costs of buying land in Barbados. With this clearer picture, you should be more prepared for the financial expectations of making your first land purchase.

Stayed tuned. Until next time, happy hunting!