Ask the expert: Real estate mortgages

As attorneys, we are often asked questions about mortgages for real estate transactions in the Cayman Islands. Below are some of the most common questions we are asked.

How would I obtain a mortgage in the Cayman Islands?
There are a number of retail banks in Grand Cayman that offer residential mortgages. The first step in the process is to shop around the retail banks and then set up an initial meeting with a loan officer.

What is the minimum deposit and how much can I borrow?
Depending on the bank, you will typically be required to pay a minimum of 10% or 15% of the purchase price as a deposit. In addition, most banks will require you to pay upfront for stamp duty on the purchase (in most cases, 7.5% of the purchase price), stamp duty on the mortgage and other closing costs like bank's attorney's fees (typically between 0.5%-1% of the sum borrowed). In terms of how much you can borrow, this will vary from bank to bank, but if you are employed and have a good credit history, banks will usually allow you to borrow up to three times your annual gross salary.

Can non-Caymanians obtain a mortgage?
Most retail banks will lend to non-Caymanian residents, but they usually require the borrower to be employed on island for a minimum of six months before considering an application for a new mortgage. Banks may also lend to non-resident foreign nationals, but they will require a much larger deposit, usually of at least 50%.

How much stamp duty is payable on mortgages?
Stamp duty is calculated as 1% of the amount borrowed up to CI$300,000 and 1.5% thereafter. If a borrower increases borrowing during the term of the loan, stamp duty is paid on the difference between the current balance of the loan (in the case of non-revolving loans) and the new borrowing.

How are mortgages drafted, registered and removed?
The bank's attorney will draft a form of charge, which includes the block and parcel number, borrower's details, interest rate and an acknowledgment of understanding that if the borrower does not comply with the terms of the charge, the bank can (in certain circumstances) sell the property. The form of charge will also append a schedule of terms covering matters such as sale of the property, insurance, repairs and further advances. Once the charge and the schedule are signed by both the borrower and the bank, the bank can draw down the mortgage advance.

Shortly afterwards, the bank's attorney will register the charge against the title at the Cayman Islands Lands and Survey Department. Once registered, the borrower will not be able to sell the charged property without the prior consent of the bank. Charges can be removed by filing a discharge of charge form that has been signed by the bank.

About the author

Michael Sharvin is a senior associate on the real estate team of the law firm Bedell Cristin in Camana Bay.