Real estate investment is a powerful wealth-building strategy, and if you're considering using your existing mortgage to acquire a second property in Aruba, there are specific factors and opportunities to explore with local banks.
1. Assess Your Current Mortgage Situation
Start by reviewing your existing mortgage in Aruba. Contact your local bank and gather information on your mortgage balance, interest rate, and monthly payments. Be sure to understand any terms and conditions that may apply to your mortgage.
2. Calculate Your Equity with Aruban Property Values
In Aruba's real estate market, property values can vary greatly depending on the location and type of property. Calculate your equity by subtracting the remaining mortgage balance from the current market value of your property. Keep in mind that Aruba's property market is influenced by tourism, so certain areas may see higher demand.
3. Talk to Local Banks
Engage with local banks in Aruba to discuss your plans. Banks such as Aruba Bank, Banco di Caribe, Caribbean Mercantile Bank and RBC Royal Bank have a presence on the island and can provide insights into the financing options available to you. They can help you understand the specific terms and conditions for leveraging your property.
4. Understand Your Loan Options in Aruba
Home Equity Loan: According to Aruba Bank, a home equity loan is a type of loan in which the borrower uses the equity in their home as collateral. It is a second mortgage that allows you to borrow against the value of your home” (2023).
Your first property, in addition to being a place to call home, is an asset that can work for you. Over time, as you make mortgage payments and property values appreciate, you build equity in your home. This equity represents the portion of your property's value that you truly own.
By taking out a Home Equity Loan, you can access this built-up equity as cash. This is where the magic happens for acquiring a second property. The funds obtained from a Home Equity Loan can serve as a substantial down payment, reducing the amount you need to borrow for your second property. Home Equity Loans often come with lower interest rates compared to other forms of borrowing, such as personal loans or credit cards. This can translate into more manageable monthly payments and reduced long-term borrowing costs. They typically offer favorable terms and flexible repayment options, making it a convenient financing solution for acquiring a second property.
5. Research the Second Property in Aruba
When researching a second property in Aruba, think about factors such as location, tourism trends, and rental potential. Local banks may offer guidance or contact us to assist you in finding the right investment property.
6. Manage Both Properties in Aruba
Managing properties in Aruba can be unique due to its tourism-driven market. Our real estate professionals can also guide you in the right direction in case you’re wondering about this.
7. Consult with Aruban Financial Professionals
Throughout the process, consult with financial professionals in Aruba, such as local attorneys, accountants, and financial advisors. They can provide insights into legal and tax considerations specific to the island.
Do you wish to receive guidance to ensure a seamless transaction? Contact one of our in-house professionals.