Things all first timers forget to avoid when trying to buy a home in Trinidad and Tobago
You’ve crunched some numbers, saved the funds, and, all things considered, you’re ready to take that big leap into home ownership. The excitement is real, but navigating the Trinidad and Tobago real estate market can be daunting. With so many factors to consider, one seemingly minor oversight can be enough to bring your real estate dreams to a screeching halt. That being said, here are 8 mistakes first-time home buyers need to avoid.
1. Not Budgeting for Closing Costs
You’ve found the perfect house with the ideal price tag and you’re ready to secure a mortgage, but do you have all the funds you need? When purchasing a home, your financial obligations extend beyond your deposit and monthly mortgage payments. “Closing costs” are those lesser-known fees associated with your mortgage, including but not limited to legal fees (0.5% to 1.5% plus 15% VAT) and stamp duty charges (3% to 7.5%). Before starting your search, request a list of these items from your lender to avoid unwelcome surprises after you’ve already begun the application process.
PropSnoop Pro Tip: Get pre-qualified with your lender to confirm your overall budget. In T&T closing costs are usually on par with your down payment so estimate an additional 10% of the value of the home, to cover these expenses.
(NB: Source for fee percentages: https://www.globalpropertyguide.com/Caribbean/Trinidad-and-Tobago/Buying-Guide)
2. Not Doing a Title Search
You’re ready to make an offer, but do you really know who you’re dealing with? In real estate not every property seller is the legitimate property owner and too many first-time home buyers in T&T learn this lesson the hard way. One of your most important responsibilities as a buyer is carrying out a Registered Land Title search through the Land Registry Office to safeguard against real estate scams. Beyond confirming ownership, title searches also identify property boundaries and indicate if there are any charges against it. In the end, it’s always better to have too much information, as opposed to entering into agreements blindly.
PropSnoop Pro Tip: Secure the services of a registered real estate agent who is familiar with the local market and can alert you to potentially shady deals.
3. Not Catering for Post Move-in Costs
You’ve signed on the dotted line and you’re finally a home owner, but are you ready to move in? Making your new house feel like home comes at a cost. From furnishings and minor upgrades to major renovations and repairs, your financial journey doesn’t end with a mortgage. Be mindful of the costs associated with taking up residence in a house and plan accordingly for these unavoidable expenses.
PropSnoop Pro Tip: Take the time to get estimates for all the items required to complete your move and factor those into your overall budget before making an offer on a property.
4. Not Considering Future Needs
You’ve fallen in love with a great house in a great neighborhood, but will it be so great a few years from now? As a first-time home buyer it’s easy to fall into the trap of purchasing the home you need today, without considering what your needs may be tomorrow. However, outside of your budget there are other factors that weigh heavily on the location and size of your new home. For instance, if you have plans to expand your family, then it might be in your best interest to prioritize a larger home even if it means moving outside of your ideal geographic location.
PropSnoop Pro Tip: Think about what you want your life to look like in 10 years then identify the key elements you will need for your home to still feel “great” in a decade.
5. Not Negotiating
You want to put in an offer but the asking price is too high, are you going to have to walk away from your dream home? Many first-time home buyers can be gun shy about negotiating, however it’s all part of the process of purchasing a home. From the listing price to appliances, renovations to moving dates, there are many things up for debate and open to compromise. Playing hardball with a seller may be intimidating at first, but you won’t regret stepping outside of your comfort zone if it saves you a small fortune.
PropSnoop Pro Tip: Work with a registered real estate agent who knows the market and is savvy with these types of negotiations.
6. Not Getting the Appropriate Home Insurance
You have to get home insurance to secure your mortgage, but are you choosing the right one? An unavoidable expense, some first time home buyers tend to either over- or under-shoot the mark when selecting an insurance package. Home insurance can cover a range of things, from the physical structure to its contents, as well as specific items that require special protection. It is important to weigh your options carefully before selecting a policy that best suits your needs. Keep in mind that over insuring your house means you’re incurring unnecessary monthly expenses, while under insuring leaves you at risk to significantly greater out-of-pocket expenses should an unfortunate incident occur.
PropSnoop Pro Tips: (i) If your property is insured for less than its replacement value it is your responsibility to cover the remaining portion of the risk. Get a professional valuation of your assets before and select a package that provides full coverage. (ii) Make note of any notable changes to your assets and adjust your coverage accordingly to avoid the hazards of “under-insurance.”
7. Getting Just One Rate Quote
You’ve got one rate quote from one lender, is that enough? When it comes to getting a quote, it shouldn’t be one-and-done. Buying a home is one of the biggest purchases a person makes in their life yet, in their haste to get the ball rolling some first-time home buyers simply go with the first financial institution they engage with. Many people favor the bank they do business with, while others may be inclined to go with the recommendation of a friend. However, rates differ among financial institutions and you may be surprised to learn there are other lenders offering more favorable rates on everything from mortgage interest to closing fees.
For more information on what you need to know before taking out your first mortgage check out our Mortgage Guide by clicking here!
PropSnoop Pro Tips: (i) It pays to compare offers so shop around and find the lender that delivers the most favorable rates based on your specific financial situation. (ii) Be wary of lenders that are willing to lend you larger mortgages than you can comfortably afford. Determine how much of your salary you can allocate to your mortgage and don’t deviate from this figure. While experts claim anywhere between 25% – 45% is reasonable, we strongly recommend 28% of your pre-tax income as a sweet spot.
To understand how mortgages can increase your real estate investment returns click here!
8. Not Checking to Determine if the Home is located in a Flood Zone
Several months later the memory of the October 2018 floods is still fresh in our minds. Yet there are many first-time home buyers who don’t consider such natural disasters when looking for a home. Flooding plagues several regions in T&T and should not be ignored during your home search. When viewing homes, ask sellers if the property has a history of flooding then do you own research through the Office of Disaster Preparedness, to avoid flood pains in the future.
PropSnoop Pro Tip:
Reference the Flood Susceptibility Map from ODPM.gov.tt to identify flood prone areas and exclude high susceptibility areas from your search. However, if you decide to live in a flood zones it is imperative that you get flood insurance as regular home insurance does not cover flood damage.