What we spent to purchase land in Barbados
Hi There! If you are anything like me, you often wonder, “How much money did I really spend?” Hence, the creation of this post, showing the total amount of money we spent to purchase land in Barbados. I wanted to provide you with a benchmark allowing you to measure your own costs from start to finish. All costs are quoted in Barbados dollars.
The process of purchasing real estate can be very overwhelming, it certainly felt that way for me. Think about it: the “rings of fire” you have to jump through, the time the process takes and the (almost) daily requests you will receive for information.
With all the frenzy around purchasing property, you can be easily be running around like a headless chicken, meeting demands and forgetting to count the cost of what you are purchasing. After all, for many of you, this will be your first property purchase, so counting the costs is very important.
PRE-QUALIFICATION STAGE
At this stage, you will be in discovery mode trying to figure out:
- Which lending agency to choose?
- How much do I qualify for?
- Do I want to buy and build or do I want to buy an already built home?
We spent NO money at this stage of the game, you can consider this the “research phase.” All of your meetings should be free with your service providers, as they are mainly just consulting. This means that the big dollars are currently tucked away, as you are only investing in time and transportation.
QUALIFICATION STAGE
This is the stage where the bulk of our money was spent. Keep in mind that this stage occurs when:
- You have chosen your property
- Your lending agency has approved your land loan or mortgage.
LENDING AGENCY
Deposit Fee – As mentioned in our previous post, this depends on the type of loan acquired. Normally, for land loans, the deposit is 10% of the total costs of the land. For construction loans, the deposit is 5% of the total cost of the loan taken out for construction. We took out a land loan of $148,900. The deposit fee we paid was $14,890.00, which was 10%.
Commitment Fee/Mortgage Fee – This fee was also mentioned in a previous blog post. We won’t go into what this fee represents here. Click the link below for a detailed explanation of this fee https://thought2realty.com/buying-land-in-barbados-four-initial-costs/. Our mortgage commitment fees were 0.2% of our loan, which came up to $297.80.
Land Cost – It would be remiss of me to leave out one of the bigger ticketed items in this post, which is the purchase price of the land. Even though we did not pay for this out of pocket like the other costs, we are paying for it monthly so we counted this as one and the same. The cost of our land plot was $100,000.00. (We are excluding the interest payments for the sake of simplicity).
LEGAL FEES
This is another “big-ticket” item which should be accounted for. Legal fees encompass a number of costs rolled into one, such as paralegal expenses, searches ex cetera.
We provide a breakdown of the costs incurred in previous blog posts, however, one of the main takeaways to note would be the borrower (that is you) pays the legal fees of the mortgagor (borrow) and the mortgagee (lender). What to expect from your attorney in a property purchase.
As this is the case we will count the legal fees for our land loan as $8,401.85. The costs would be the legal fee of $7,033.85 and mortgagor’s disbursements of $1,368.00.
INSURANCE COVERAGE
Our lending agency requires that we obtain insurance coverage for our land loan once it is above $100,000.00. Our loan was $148,900, therefore we need coverage for the excess.
The life insurance premium per month is $49.95. We will take the insurance premium for one year to be counted as part of the costs, for illustration purposes. This totals to about $600.00.
WINDING UP
This may be the end of the road for most readers. At this stage, this is usually where most persons stop after they have bought land and then they take a couple of years to gather funds for the construction of their home. We did not do this. We got our plans drawn even before we fully owned the plot of land. It was off the market and we felt safe doing this, but all in all it was a risky move. PLEASE DO NOT DO THIS! I repeat, this is a risky move. Given that we decided to have plans drawn, we will count these costs into the total amount.
TOWN & COUNTRY PLANNING FEE
As you may recall, when plans are submitted on a homeowner’s behalf there is a fee paid to Town and Country Planning. If you are unfamiliar with the Town and Country Planning process; click the following link which gives you full details on the process. Town & Country Planning and Your Plans. Our total Town and Country Planning fee was $837.15.
DRAFTSMAN FEES
Our draftsman fees amounted to $5,581.00.
FINAL TOTAL AND OUT OF POCKET EXPENSES
We spent $120,607.80 in total to acquire our land plot. This includes all the expenses we incurred and spent to purchase land in Barbados, whether it was loaned to us by the bank or from our savings.
If we were to count our out of pocket expenses or savings alone, we would have spent $7.315.95.
If we had decided to have our plans drawn after we purchased our plot of land, the architect fees and the Town and Country Planning fee would be eliminated from our out-of-pocket total. Our total payout would have been just about $1,734.95.
Bear in mind that most of the above fees depend on the costs of the property you are purchasing. The deposit fee, commitment fee, legal fees and insurance expenses are all a percentage of the land cost in some form or fashion. Therefore, these will be higher if the cost of the property is higher than the costs shown above.
CONCLUSION
I hope this post was eye-opening and gave you an adequate breakdown of the costs to expect during your first property purchase. Whether you set aside additional funds to aid in your property purchase or you borrow from the bank, it is always important to have some knowledge of what costs to expect and plan for.
As shown above, the takeaway costs are the:
- Land Cost
- Land/Property Deposit
- Commitment Fee
- Legal Fees
- Insurance Expense
- Draftsman Fee
- Town and Country Planning Fees
Photo Credits in order of appearance
Summer photo created by evening_tao – www.freepik.com
Credits to The Creative Exchange on Unsplash for photo
Photo credits to Napendra Singh on Unsplash
Credit for photo given to Jose Losada on Unsplash
Photo by Glenn Carstens-Peters on Unsplash
