So you want to know how to buy a house in Trinidad and Tobago? Keep reading my friend.
Step 1: Talk to your bank representative about how much your bank would be willing to lend you
A lot of people choose to do this step after they have already started actively looking for a house. However, I think that you should consider doing this step first. Here’s why.
1. You will know your budget.
Not knowing your budget and looking at houses is a recipe for disappointment. Or as the old people would say, a recipe for champagne taste on a mauby budget.
Speaking with a representative of the bank will give you an estimate of how much they are willing to lend you based on your current salary and existing debts.
2. You will know the down-payment you need.
Your budget for a home will dictate the required down-payment, which is usually 10% of the purchase price. For example, if your bank would be willing to lend you up to $1.5M, your maximum down-payment would usually be $150,000.
If you’ve started saving already, great! But if you haven’t, seeing the reality of the required down-payment in black and white figures could be the kick in the bumsie that you require.
3. You will get clearer examples of the other costs associated with buying a house.
Other than the down-payment, you will also need to save for other costs like –
- bank fees: determined by the cost of the house
- lawyer fees: determined by the cost of the house
- stamp duty: the amount you are required to pay depends on whether you are a first time homeowner or not
- valuation report: if required, this cost is determined by the value of the house.
- premiums for life insurance: It may be useful to ensure that the mortgage will be paid off in the event of your untimely demise through a life insurance policy assigned to your bank.
Your bank’s representative should be able to explain these costs to you and give you an estimate, based on the sum that the bank is willing to lend to you.
4. You will receive the bank’s list of lawyers.
Receiving this list is important for Step 4. Keep it in your figurative back pocket.
Step 2: Save Money to Cover the Down-payment and Purchase Costs of the House
This step is one of the hardest on to journey of ‘how to buy a house’. You will need to ensure that you have the money to cover the down-payment and other related costs before you start actively looking for a house.
As a starting point, you will need to understand your income and, more importantly, your expenses.
As a point of common sense, saving will require you to either –
- Increase your income and keep your expenses at the same level;
- Keep your income at the same level but decrease your expenses; or
- Increase your income and decrease your expenses.
Step 3: Start Looking for the House that Will Become Your Home
Now that you know your budget and have most (if not all) of the money required to purchase a house, you can start looking.
In my day, the only option for looking for house and land was the classified section in the newspapers (and you’ll still find houses advertised there). However, with the internet, there are so many other options. Here are a few for you to consider:
House Viewing Appointments: What to Look For
One important step of how to buy a house is actually visiting prospects. Let’s say that you have a viewing appointment for a home. When you get there, there are a few things that you should look out for such as-
- plumbing leaks or faulty plumbing: always turn on the taps in the house and flush the toilet.
- evidence of termites: here’s an example of what termite tracks or holes look like.
- faulty electrical: always turn on the lights and ask when the home was last inspected (an inspection certificate is only valid for a maximum of 5 years) or rewired
- water marks on the ceiling: this could indicate a leaking roof
- foundation issues: peeling paint or large cracks near the bottom of inner or outer walls could point to foundation issues. When in doubt, you might need to consult a structural engineer before you commit to purchasing.
- whether the area is prone to flooding: check this resource from the ODPM.
- fencing and property boundaries: always inquire whether the fence you see belongs to the property being viewed or was built by the neighbours. I viewed a property once and noticed that the neighbours built a huge structure directly on the wall that belonged to the house I was viewing. I also noticed that the wall was cracked, probably from the weight of that structure. To avoid inheriting boundary issues, I passed up on that property.
Step 4: Review The Agreement for Sale
This is where things get exciting.
A. You’ve found a house within your budget that you want to buy.
B. You’ve made an offer to purchase to the seller.
C. The seller has accepted your offer and wants to sell to you.
The next step for how to buy a house is the agreement for sale. This is usually prepared by the seller and given to you for review.
Consider contacting one of the lawyers on your bank’s list (the one in your figurative back pocket from Step 1) to review the agreement for sale on your behalf before you sign. Why? For two reasons –
- Because it’s usually better if one lawyer is ‘with you’ for the entire process.
- Moreover, as the old people say, don’t be penny-wise and pound-foolish. Your home purchase is likely to be the largest transaction of your life. Don’t risk throwing your down-payment away because you didn’t want to pay a lawyer to review an agreement for sale to ensure that you are protected.
Seldom will you, as the purchaser, be requested to prepare the agreement for sale. However, it happens. If it does, different banks have different rules.
Firstly, you should still consider using a lawyer from your bank’s approved list. Secondly, some banks may require you to complete the mortgage application process (usually done after the agreement for sale is signed) before the agreement for sale is prepared by the lawyer from their approved list. Note that, if required, this may not be a quick process.
Step 5: Sign the Agreement for Sale for the House and Land
Now that your lawyer has assured you that your interests are being protected by the agreement for sale, get out your special signing pen. And your down-payment.
Usually, you will need a managers’ cheque in the name of the seller. If a seller asks for cash, be suspicious. Be very suspicious.
Lastly, keep your bank informed of your progress. After you’ve signed the agreement for sale, both you and the seller will usually have 90 days to complete the sale.
Step 6: Mortgage Process of How to Buy a House
You will now need to submit the signed agreement for sale to the bank, together with any other documents that they require. If you need a valuation report, this is the time when you will obtain it.
Meanwhile, your lawyer will be verifying that the property has good legal title, as well as preparing all the legal documents required to complete the transaction. These documents will vary based on the type of interest being sold i.e. freehold or leasehold interest.
After processing your application and getting the OK from the lawyer, your bank will issue you a letter of offer, followed by the disbursement of the mortgage loan soon after. ‘Disbursement of the mortgage loan’ is a fancy way of saying ‘the remaining purchase price of the home’. The remaining purchase price is usually issued in a managers’ cheque or cheques in the name of the seller(s).
Step 7: Completing the Purchase of the House
You’ve almost completed how to buy a house! 90 days after the sale (if not before), you’ll need to get out your special signing pen again to complete the purchase of your home. Sometimes, it’s useful to have a final viewing appointment of the home to ensure that all fixtures remain intact.
Once you are satisfied and ready to proceed, your lawyer will arrange a mutually convenient time for the signing with all parties. You will officially receive the keys from the seller at this appointment. Sometimes, banks will need the signing to take place before a certain time for them to complete certain requirements on their end.
After you sign, make sure to request signed copies of all the documents and a certified copy of the deed or certificate of title from your lawyer.
And that’s all she wrote on how to buy a house!
Also, if you’re looking for a house because you’re getting married, check out our article on how to get married in Trinidad and Tobago here.
