Once defined by The Independent as a “Low-cost rival to the Caribbean”, Cape Verde is a stunning archipelago of ten Atlantic islands, studded with white sandy beaches, just 300 miles off the west coast of Africa.  Captivated by their individual charms, you are likely to have found your chosen property on any one of the favourite isles of Sal, Santiago or Boa Vista.  So important matters now need to be considered, including how best to finance your dream home.

Points to remember

Once you have found a suitable property, you will need to put down a reservation fee or deposit, usually of around 10% of the purchase price.  Mortgages will not be offered on off-plan property that essentially does not yet exist but in some cases a tri-party agreement with a developer, or an insurance policy paid for by you will allow you to raise some funds to support the stage payments prior to completion of the project. 

The developers of off-plan units will often have their own payment structures to work to.  Many will also offer their own mortgage facilities for properties in their development and these can sometimes be beneficial to both parties, depending on the conditions of the loan facility.  Be sure to thoroughly check the small-print and weigh up all your options before making your final decision.  Additionally, you’ll need to make sure that any deposits you pay are refundable until you have secured any funding you may require for completion. 

Typically, when buying property in Cape Verde, your costs will be made up of mortgage registry costs at 3% of lending, notary and land registry at 3% of purchase price, mortgage arrangement and application fees at 1.5% and valuation fees at 0.50%.

Finally, remember to appoint a good English speaking lawyer to check the title deed and registration of your property and ensure your legal rights are protected at all times (legal fee should amount to around 1% of the purchase price).

Local mortgages

Repayment mortgages are available from Cape Verdean banks for residential and investment properties - Tota and Acores, Caixa General de Depositos, Banco Nacional Ultramarino (BNU), Banco Mello and Banco Interatlantico are the main mortgage providers on the islands. 

They will offer you mortgages on existing property as well as the option to re-mortgage property or land.  Terms are for a maximum of 35 years or up to 75 years of age.  Capital and interest loans are both available, with interest only loans running for 5 years.  

Mortgages in Cape Verde can be obtained in principle, subject to the security of the property, however, a formal letter of offer can only be issued once the property is evaluated by the bank. Many banks don’t undertake formal valuations and will simply assess from local knowledge if the property is deemed to be worth the purchase price.

Raising funds from banks in Cape Verde comes with its fair share of advantages and disadvantages and some buyers prefer to find alternative means to raise their finance, perhaps in the form of a mortgage from a bank in another country, cash funds or an equity release scheme from an existing property in their name.  However, advantages to local borrowing include the fact that Cape Verdean banks do not base their loans on your repayments for UK assets.  Additionally, servicing your mortgage payments each month is easier in the local currency, Cape Verde Escudo (CVE), as you may well lose out on exchanging money each time to cover your expenses. If you plan to rent out your property, then decide whether you will be receiving local or foreign currency for this and do your sums accordingly.

Don’t expect to be able to borrow much more than 75% of the valuation or purchase price, whichever is lower and, as interest rates are generally higher - some 3 to 4.5% above the prevailing Euribor rate – than in many other jurisdictions, you may be paying more than you would like for monthly repayments.  Loans can now be taken out in Euros but the maximum loan will cover only 50% of the total value for off-plan property and 80% of completely built property.  A final possible disadvantage, though not crucial, is the fact that lenders can be slow in assessing clients’ applications, and sometimes you will be requested to supply extra translated documents - a good deal of patience is required.  Undoubtedly, as competition grows, the need to provide better customer service will also increase.

What the banks wish to see

In general, the banks do not consider self-certified loan applications.  They work on a strict net income and affordability ratio, and combined financial commitments, including the new loan to be taken out, must not exceed around 35/40% of your net incomes.

Proof of income is always required by Cape Verdean banks in order to process a mortgage application.  Standard documents required for non-residents are the purchase contract and proof of your current address.  If you are employed you’ll need to supply your last 3 months pay slips, last 2 to 3 years P60s, an employer's reference and your last 6 months bank statements.  Self-employed borrowers will need to provide their last 3 years certified accounts, last 3 years self-assessment tax returns, last 6 months business and last 3 months private bank statements and certified copies of their passport.

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