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Buying in the BVI

ARE YOU READY TO BUY? – Knowing when is the right time to buy your first home can be a frightening and equally rewarding time for any aspiring homeowner.  You might be looking to seize the right piece of property and waiting for the market to go in your favour to make your move.  Or perhaps you are tired of rising rent prices and the endless "for rent" ads in the weekly papers with prices that equal what you would hope to be your mortgage.  Considering those factors, a lot of residents are now trying to purchase their first piece of paradise in the BVI.     When is the right time for anyone to buy their first home? There are wide ranging factors for prospective homeowners to consider when thinking about taking the big leap into home ownership.  Namely, are you currently managing your finances above the redline, do you have a stable income, and are you really ready for the long-term financial commitment of a mortgage?

Buying your first home is a very personal decision.  A decision to own your first home should be made after properly scouting the market and most importantly, being fully aware of your personal finances.  Here are other ways you will know if you are really ready to buy.

You are a budget master
Owning your own property, whether you are considering living in it or renting, comes with a sometimes uncontrollable amount of expenses.  Knowing how to properly budget and, above all, sticking to that budget is necessary.  If you do not have a monthly household budget, it is something that perhaps you should begin thinking about creating.  Allow yourself to master your budget before committing to a mortgage.  

Having a budget allows you to see your financial profile.  Your budget should include your sources of income matched alongside your monthly expenses.  Over time a good budget should allow you to see where your money is going, in what areas you can save money and overall how much money you have that can be used toward a monthly mortgage.  

This ultimately lets you know what type of home you will be able to afford and maintain.  Continue to read the Property Guide and other publications that will teach you more about the cost of property in your desired area of residence.  To see what your monthly budget would look like after becoming a homeowner, create a new budget with a realistic mortgage payment, higher utility bills, property tax, insurance, maintenance and the cost of repairs.  

One cost few people consider in creating a new budget is transportation.  If you currently live in Road Town and you purchase a home in Cane Garden Bay, chances are you will spend much more at the gas pump once resident in your new home.  The additional $20 you may pay at the pump on a regular basis will add up, monthly and annually.

After looking at your new financial profile, make an honest decision as to whether you can purchase a home now, or if you need a few more lessons before you truly become a budget master.

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You have a stable and steady income and a cushion to fall back on
It’s not a big secret–if you are jumping from job to job, the serious and long-term commitment of home ownership might not be the wisest decision for you to make.  Owning a home is often no less than a 20-year commitment.  If you are not in a stable job or have no stable form of income, such a long-term financial commitment should not be made.  

A word of advice for couples who are considering purchasing a home and whose budget tells them they are in a good position to do so: If you are thinking about starting a family, this decision should be factored into your long-term budget.  If you are single and just starting to establish yourself, think about the possibility of going back to further your studies and how mortgage payments will be met if the property is not rented immediately.  Experts advise to have a savings of at least six months in case you lose your job, your budget if offset by an uncontrollable expense, or if a partner has to take uncompensated paternity or maternity leave from his or her job.

You are ready for a 30-year commitment
Having a mortgage doesn’t mean paying this month and thinking about paying the next.  It means paying for the next 360 months.  This might sound scary, but it is the reality of being a homeowner.  If you are thinking of owning your own home, knowing you have to pay a certain amount of funds that’s perhaps double what you pay in rent is something for which you have to plan.  While home ownership carries with it a large degree of financial responsibility, it can also be very rewarding as you build equity and firmly establish yourself.

Although 30 years might seem like a lot of time, with the right budget and planning, you will easily see time flying by once you are able to properly take care of financial obligations.  If that’s not enough, imagine the deal you will have on your hands in the next 30 years, or even the next 10 years when someone is scouting the market for property in the BVI.

No one is wondering when you’ll pay them back

Practice good borrowing habits.  If you borrow small loans, make sure payments are made on time and that the entire loan is paid off before incurring other debts.  Lenders view good personal financial management on the part of a client as a sign that the person is well equipped to manage the long-term financial commitment of a home.  This can ultimately affect your ability to negotiate better interest rates for your home.  Banks are in the business of giving loans, so when they see good personal financial management in a potential customer, they know that other financial institutions see that customer as a great investment as well.   

If you are in the unfortunate situation of owing a lot of people in town, lenders use such situations to determine the likelihood of you paying back a home loan. Although the British Virgin Islands does not have an elaborate tracking system involving such things as credit scores and credit collection agencies, financial institutions are well aware of people who are known financial abusers.  Banks in the BVI use the old-fashioned method of simply picking up the phone and calling around to other banks to check up on your payments before they loan you money.

Most banks fortunately advise possible loaners that their monthly housing costs will not take up more than 35% of their monthly income.  Your total debt should not exceed an additional 10% of your income.

If you know you owe people around town or you're still uneasy about managing old loans with your current income, and winning the lottery seems an unlikely solution to your debt problems, work on decreasing your debt.  Make a plan to get out of debt or clean up debts to a manageable rate at least six months or one year before applying for a home loan.

You’ve saved up for a down-payment

Most financial institutions require a down payment of approximately 20% of the purchase price of any property. Consider a reasonable investment to build a home or purchase at $425,000.  Your down payment will then be $85,000.  If you choose not to put a down-payment on your real-estate investment or a low down payment option, your interest rate will increase significantly.  A reasonable down-payment also allows you to build equity.  In the event you have to sell the home early, you will lose much more money versus someone who did make a 20% deposit on his or her home.   

You are ready to fix your own leaks and squeaks
Yes, own ing your own castle does mean that you are king–well, at least king or queen of the square footage you intend to purchase.  When there is a leak under a sink, faded paint on the exterior or termites in the interior, when you own your own home there are no servants to fix the king or queen’s needs.  You are your landlord.  All complaints and demands rest on you.  

With owning a home comes a high level of responsibility.  There is no landlord to call and yell at when a pipe breaks and your entire bedroom is flooded.  You become an instant handyman or the accountant that pays a handyman to fix the leaks, the mason, plumber, carpenter, gardener, painter, or even the exterminator.  Apart from needing a gamut of new skills, not to mention equipment, being a landlord also takes up a lot of time that a new homeowner might have grown accustomed to just having as free time or using to engage in other activities.  

In short, owning your own home brings with it a wide array of new responsibilities of which all potential homeowners should be aware, and should have the personal commitment to manage.  If you’re not looking forward to fixing things around the house and will easily call in the professionals, be ready to master your accounting and budgeting skills to ensure you can cover the costs of not pitching in yourself. But if you are ready for the responsibility of keeping up a home and mastering your finances, you might be ready to own your own piece of paradise.

 

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