RESOURCES

Closing Costs 

The basic conveyance costs are set by the Bermuda Bar Council are on a sliding scale dependent on the dollar amount of the transaction.

The rates of Stamp Duty Tax are also calculated on a sliding scale of the dollar amount of the transaction – basically the more expensive a home, the higher the tax. The cost of the Stamp Duty is shared between the Purchaser and the Seller.

• On the first $100,000 of that amount or value, or any part thereof – 2 per centum.
• On the next $400,000 of that amount or value, or any part thereof – 3 per centum.
• On the next $500,000 of that amount or value, or any part thereof – 4 per centum.
• On the next $500,000 of that amount or value (over $1,000,000 but not exceeding $1,500,000) or any part thereof – 6 per centum.
• Thereafter, 7 per centum.

Looking to buy

Buying a house is one of the most exciting and important decisions you will make in your lifetime. The following guideline will help to make the purchasing process as uncomplicated as possible.

Pre-approval financing

Most Sellers in today's market are looking for Buyers who have been pre-approved by a bank or lending institution, and with your pre-approval in hand, you will be well placed once the bidding begins for your new home. The first step is to make an appointment with your Loan Officer, who will make an assessment to determine how much you will be able to borrow. Once your borrowing limit has been established, you will be issued with a pre-approval letter to this effect. This letter is normally valid for six months, after which you will need to seek an extension from your lenders. You are now ready to meet with a Real Estate Agency, where your property search will get under way in earnest.

Finding the right Real Estate Agent

First and foremost, you will want to deal with a licensed Real Estate Agent you can trust. Generally, the advice of friends, family or even a property lawyer will help with making this crucial decision. When you do finally meet with your Agent, be sure to let them know exactly what you are looking for in a home. The more specific you can be the better, as this will avoid time lost in viewing real estate that does not meet your requirements. Soon, you will be able to short-list your favourites and be well on your way to a new home.

Retaining a Conveyance Lawyer

Once you have decided on a property/home, and before you sign the 'Sale and Purchase' Agreement drawn up by the Seller's attorney, you will need to retain a good Conveyance Lawyer. At your first meeting bring as much information about the property, the Seller, and the transaction as you possibly can. Such information may include, but is not limited to, the full names, addresses and contact details of all parties who will be involved in the transaction, the full address of the property, whether the property is freehold or leasehold, whether the seller has any outstanding mortgage or liens on the home, whether the seller needs the proceeds of the sale to help finance the purchase of a new home, zoning of the property, purchase price of property (include deposit, if any), whether the property is being sold with vacant possession, expected completion date, name of your prospective home insurers. You will also want to discuss with your lawyer, all likely costs associated with the purchase of your home, including legal fees, bank administration fees, stamp duty, closing costs, etc.

Offer and Acceptance

After you have made an offer for your new home and a price has been agreed upon with the Seller, a Sales and Purchase agreement will be drafted by the Seller's lawyer. Upon completion, it will be sent to your lawyer for your review. Together, you and your lawyer will go over the Sales and Purchase agreement, as well as the terms and conditions contained in the agreement, which once agreed upon and signed, becomes a legally binding contract for you to purchase from the Seller, the property you have covenanted to buy. The purchaser usually signs the Sales and Purchase agreement first, followed by the Seller, and finally the Agent. A copy of the agreement is then sent to your bank or lending institution. Your loan officer will then arrange for you to come in and sign the Offer to Finance Letter and follow up with instructions to your lawyer to draft your mortgage document. At the time that your mortgage and conveyance documents are being drafted, you should arrange for a home insurance policy on your new home, to take effect from the date of closing. At completion, you should advise your lawyer the name of your insurer and your policy number. Your lawyer will then send the mortgage document, together with a copy of your insurance policy, to the bank and await the mortgage proceeds. At this juncture, the buyer is required to pay an agreed upon deposit amount, usually 10% of the purchase price of the property. These funds are then held in a segregated account, either by the Seller's lawyer or by the buyer's real estate agent, until the transaction is completed or cancelled. Once the deposit is paid, the property is effectively off market, and the buyer and seller have a duty to act in good faith to satisfy all contractual conditions by the date stipulated in the Sales and Purchase agreement. It should be mentioned, however, that if a condition or stipulation cannot be met or re-negotiated, then the Sales and Purchase agreement may be rescinded, with the deposit being returned to the buyer.

Financing

Even if you have been pre-approved, you will need roughly 14 (fourteen) days lead time for the bank to confirm that they will lend you the funds to purchase your home. With this regard, it is recommend that you inform the bank, as soon as possible, of the closing date specified in the Sale and Purchase Agreement.

Closing Costs

Although the proceeds of the mortgage funds will generally cover the purchase price of your new home, there are extra costs that need to be considered. These include stamp duty, which is heavily weighted among the various components of closing costs, and is usually shared equally between the buyer and the seller. Further costs will be associated with the preparation of the property transfer deed and the mortgage deed, possible home inspection or structural surveying costs, property valuation costs, government searches and document registration charges, legal costs for the negotiation and preparation of the sales contract, bank administration fees ( up to 1% of the face value of the mortgage), and if applicable, license fees for any non-Bermudian purchaser. As you can see, it is vital that these costs are included in your financing calculations with the lender, in order to ensure that you have sufficient funding for closing.

Completion

After your attorney has received the mortgage proceeds, any liens/debts against the property will be paid off and the balance will then be sent to the seller's lawyer. The conveyance document will also be sent to the seller's lawyer for the seller's signature, after which it is returned to your lawyer as proof of your legal title to the property. Once the conveyancing to transfer title to you is complete, and the seller's lawyer confirms receipt of the proceeds of sale, you are officially a new home owner. Congratulations!

Non-Bermudian Buyers

The acquisition of property by persons designated as non-Bermudian is governed by the Bermuda Immigration and Protection Act 1956, as amended, and empowers the government to enact policies designed to limit the number of properties available for sale to non-Bermudians. The basic tool used to regulate land ownership is the Annual Rental Value (ARV), which is used to determine government land tax and is not necessarily a reflection of market value. A non-Bermudian may only purchase property in Bermuda based on the following pre-requisites:

Licensing and Fees

Application for a license to purchase property must be made through a local attorney to the Minister of Labour and Home Affairs, and must be supported by a bank reference and two character references, preferably Bermudian, prior to issuance of a license. License fees are currently 12.5% of purchase price for a house (increasing to 12.5% in October 2014); 6% for a condominium (increasing to 8% in October 2014); 6.5% for all properties within designated resort developments. It should be noted that the license is required prior to closing the purchase of the property. Additionally, there is a license application fee, currently $1,416.00, which is refundable once the license to purchase property has been granted. Licenses are only granted in respect of a specific property and the application process may take up to six months.

ARV and Purchase Price

Private homes are eligible for purchase only if the ARV is in excess of $153,000. These properties typically start at about $3.5 million. Condominiums may be purchased only if the ARV is in excess of $32,400, and must be located within a "designated development". Prices typically start at about $800,000. Agreement in principle between a non-Bermudian buyer and the seller includes a deposit of 10% of the purchase price, which amount is held in escrow, subject to contract, and is deducted from the overall purchase price.

Other property restrictions

Non-Bermudian buyers may not buy investment property, land, commercial real estate or property intended primarily for rental income. Property must be for the residential use of the license holder, however, permission to rent may be applied for through the Department of Immigration and if granted, rarely extends for periods of more than one year and includes a tax of 7.25 percent. Also, the property may not be sub-divided or its boundaries changed. In general, non-Bermudians are not allowed to own more than one residential property at a time and should purchase of a second property be permitted, it will be on the condition that the original property is disposed of within 12 months.

Non-Bermudian Trust

The Bermuda government has approved non-Bermudian purchasing by application in Trust, subject to (a) locally licensed Trustees, (b) limited to one generation and (c) after death, the property must be sold within 2 years.

Historic Homes Listing

There are 272 buildings which have been listed by the Bermuda government as have special architectural or historical interest. The purpose of this statutory protection is to note the building importance when future development could effect its integrity. If you own one of the Listed buildings and you wish to alter, extend or demolish you must apply for permission from the Department of Planning.

One benefit of owning a listed building is that there are no fees payable for planning applications and building permit applications. The full list of buildings is available for inspection at the reception desk at the Department of Planning during normal office hours. There are 4 grades of Listing in order to assign a level of relative importance;.

• Grade 1: Buildings, structures or groups of buildings that have survived in essentially their original condition and that are of such exceptional interest and architectural or historical value that they should normally be preserved in their present form, both structurally and decoratively. Minor alterations or additions must be carried out in the same materials and in same structural and decorative style as the original.
• Grade 2: Buildings, structures or groups of buildings that have survived in such condition and are of such special interest and architectural or historical value that they should be limited to minor alterations and additions that do not impinge on those parts of the building to be protected and preserved. Such works should be normally carried out in the structural and decorative style of the existing buildings.
• Grade 3: Buildings, structures or groups of buildings which serve Bermuda as an important visual amenity and are of such architectural or historical value that alterations or additions should be carried out in sympathy with the structural and decorative style dominant in the existing structure.
• Grade HM: Buildings, structures or groups of buildings not originally intended for residential, commercial or administrative purposes but as defensive structures, monuments, outbuildings or other ancillary structures. This category also includes buildings that have become significant ruins. Their aesthetic value may be modest, but their historic significance and structural interest make them of vital historic importance. They are integral to both the Island's history and to its cultural tourism. Alteration should be avoided and restoration should be on a like-for-like basis.

Commonly Used Terms

Acceptance
When you are offered and accept a mortgage offer from a lender this is what you need to sign and return.

APR
Stands for 'Annual Percentage Rate' relating to interest on a loan.

Applicant
The term used by an estate agent to refer to you when you are a potential buyer of a property.

Appraisal
When selling your house an estate agent will 'appraise' your property to determine a current value for it.

Arrangement Fee
Some lenders may ask for this fee for providing or 'arranging' a loan.

Assignment

The transfer of ownership from one person to another. For example if you buy a leasehold property ownership is 'assigned' to you via the contract.

Base Rate

This is the lowest rate of interest a bank will charge when it lends you money and is used as a benchmark to set interest rates for borrowers. This rate set by the Bank of England and is reviewed several times a year. Lenders will charge borrowers a margin above the base rate.

Bridging Finance/Loan

You may need 'Bridging Finance' if you are buying a new property before selling your current house. This is to 'bridge' the gap before you have sold your property so as to complete the buying process of your new property before selling your existing home.

Broker

This is a person who advises on mortgages and loans, known as a 'mortgage broker'.

Capped Rate

The maximum set interest rate you will pay on a mortgage for a set period of time. This means that the interest rate cannot go higher than the capped rate during the specified time period, usually the first few years of the loan.

Chain

This refers to a sequence of buyers and sellers. Most people who sell their homes are also buying at the same time. There can be a 'chain' of several buyers and sellers, each dependent on each other for the sale and purchase of their new homes. If one buyer or seller drops out the whole chain may collapse, leading to a domino effect where the paperwork for several properties is delayed or cancelled altogether.

Chain Free

This is when the owner of property doesn't need to sell the property in order to buy another, thus it is offered chain free.

Collateral

Your house is 'Collateral' when used as a guarantee you will repay a loan to your lender. If you do not keep up with repayment your house could be sold by the lender to get back the money they have loaned you.

Completion

This is the final stage of the property buying process - when the agreed sale price has been paid by the buyer to the seller. Legal ownership has been transferred from the seller to the buyer of the property.

Contents Insurance

This insurance is taken out to cover/protect personal belongings that are in your home.

Contract

This is the agreement that once signed by the buyer and seller binds both parties to the sale and purchase of the property.

Conversion

This can refer to a property that has had the loft converted into a room, or a house that has been converted into flats.

Conveyancing

The name of the legal process that transfers property ownership from the seller to the buyer carried out by a solicitor.

Covenant

A requirement by law on the owner of a property to either do or not do something with their property.

CAM

Stands for Current Account Mortgage.

CCJ

This stands for County Court Judgement. If you have a judgement against you for defaulting on a debt it may mean you are turned down for future loans or pay a higher interest rate.

Deeds

The legal documents regarding a property.

Default

This is a term used when you do not do as you agreed, eg. failing to make a mortgage payment. If you fail to make mortgage payments (or default), your home could be repossessed.

Delayed Completion

Typically completion takes less than 28 days after the exchange of contracts. If it takes place after 28 days then it is called 'delayed completion'.

Deposit

In terms of mortgages a deposit is the initial lump sum payment the buyer contributes towards the total purchase price of the property.

Disbursements

This is another word for the legal costs involved with purchasing a property.

Discounted Rate

This type of mortgage has an interest rate lower than the lender's Standard Variable Rate (SVR).

Early Repayment Charge

This is a charge or 'fee' payable if you pay part or all of your mortgage off earlier than agreed. This is used to compensate the lender for interest that would have been paid if the mortgage had run for the full time period agreed.

EPC

Energy performance certificate - part of a home information pack.

Equitable Interest

When a person has some legal rights to a property but not including sale of the property.

Equity

This is what you actually own - it is the difference between the market value of your property and the amount of the loan you still owe to the lender.

Exchange of Contracts

This is the point at which the buyer and seller are legally bound to complete the sale.

Execution Only

A service with no advice, just carry out the orders of a customer.

Fixed Rate Mortgage

A mortgage which has a 'fixed' rate of interest for a set period of time.

Fixtures and Fittings

These are items in a house that are included in the sale. For example lighting fixtures, carpets and so on - these should be agreed / confirmed before a sale.

Flexible Mortgage

As the name suggests this mortgage is flexible in terms of how you pay the loan back. An example could be that it allows you to make overpayments or pay off your mortgage early.

Freehold

Complete ownership of a piece of land and the property that is on it.

Gazumping

This is when a vendor (seller) accepts an offer but later rejects it to accept a higher offer by another buyer.

Gazundering

This is the opposite of gazumping - when the buyer threatens to pull out just before the exchange of contracts if the price is not reduced.

Gearing

Using loaned funds to progress investments. For example, buying a house with a small deposit and the rest with a mortgage and then selling the property on at a higher price, making a profit.

Ground Rent

This is rent paid annually by the leaseholder of a property to the owner of the freehold. Usually it is paid to the owners of the land on which the property/properties are built.

Guarantor

A person who agrees to guarantee that they will pay a debt or loan if you default on payment.

Home Information Pack ( HIP )

Also known as a Sellers Pack or HIP this will be a mandatory Survey from the 1st of August 2007 to be produced by a home owner ( 4 bedrooms or more ) or selling agents via a home inspector before a property can be put on the open market. The aim is to help improve the process of buying and selling a home, it is part of the conveyancing process and will include detailed information about a property.

IFA

Independent Financial Adviser.

Instruction

This is when you give an estate agent 'Instructions' or the right to sell or let your property.

Joint / Multiple Agency

This is when you instruct more than one estate agent to market your property.

Land Certificate

The certificate that proves ownership of land issued by the land registry.

Land Registry

A government office that stores records of land ownership and any charges like a mortgage.

Lease

A legal document detailing an agreement made between a freeholder and those occupying their property for a specified period of time. It lists all the conditions which the leaseholder must abide by and what the landlord's responsibilities are.

Leasehold

Land or property is 'leasehold' when the owner has to pay the freeholder an annual sum of money.

Lender

A person or company that lends money for an agreed time period. They expect to have the money repaid back with interest added - your mortgage company is a lender.

LTV

Loan To Value.

Maintenance Charge

A landlord charges for the annual maintenance of a property which should be agreed in your contract. This includes keeping the outside of the property in good order and gardening services in communal areas.

MIG

Mortgage Indemnity Guarantee - an insurance premium some lenders may need you to take out on certain mortgages.

Mortgage

Money borrowed from a lender to buy a property. The borrower agrees to use his or her property as security against it until the loan is paid back.

Mortgage Deed

A document which has the details of a mortgage arrangement.

Mortgage Offer

An offer from a lender which details the terms and conditions of a loan.

Mortgagor

The individual who is borrowing money for the purpose of buying a property.

Negative Equity

When you owe more than the market value of your property, or have paid or are paying back more than a property is worth.

Offer

An offer, usually below the asking price, you make on a property.

OMV

Open Market Value - the value a property can achieve when there is a willing buyer and seller.

Redemption

This is the moment when you pay off your mortgage.

Registered Land

Land including any property on it that is registered with the land registry.

Right Of Way

The legal access to a piece of property so as to access your own property.

ROI

Return On Investment - how much you get out of what you put in.

Searches

The process of finding out if there are any unwanted effects now or planned for the future on a property.

Sellers Pack

Also known as a HIP or home information pack - includes and EPC ( energy performance certificate ) advice on reducing carbon emissions and fuel bills.

Sole Agency

When a single (sole) estate agent has been given the right to sell or let a property.

Stamp Duty

Tax paid to the government on the purchase price of property.

Subject To Contract

The point at which both parties are free to pull out of an agreement before exchange of contracts.

Survey

A survey is the report produced by a building surveyor for the purpose of determining the value of the property and if it is structurally sound.

Tenant

A person or persons (can be a company or organisation) who is entitled to occupy a property under the terms and conditions of a tenancy agreement.

Tenure

The type of ownership of a property such as Freehold or Leasehold.

Title

The legal right to ownership of a property.

Title Deeds

A Document that shows ownership of a property.

Under Offer

When a property has had an offer accepted but contracts have not been exchanged.

Valuation

A service by an estate agent or independent expert to determine the value of a property in the current market.

Vendor

The person who is selling a property.

This is meant as a general guide and should not be seen as legal advice.