Cape Verde Mortgages

RMDS has teamed up with a number of experienced International Mortgage Brokers. Over the years we have also developed a relationship with a few specialist Mortgage Brokers that focus purely on Cape Verde. They offer a truly independent service. Currently the interest rates are about 8%.  

The financial services industry in Cape Verde is still developing. The situation has improved tremendously in the last few years. When our Director first made contact with the banks in Cape Verde, interest rates were as high as 15-17%. They were at 11% just 18 months ago. Bearing in mind that the Cape Verde Escudo is linked to the Euro and to interest rates set by the European Central Bank (ECB); this was a substantial mark up. Especially if you consider that the ECB rates have been consistently lower than the Bank of England base rates over the last few years.

The main reason interest rates were so high is that there were no economies of scale. In other words, the banks in Cape Verde did very few mortgages. As the property market has developed the numbers of mortgages has increased significantly.

There are only a handful of banks that operate in the jurisdiction. They are Cape Verdean and Portuguese.

In the early days the vast majority of property and land purchases were done in cash. Clients that needed to borrow would typically take a further advance on their UK property. Since then, interest rates in Cape Verde have come down consistently even though the ECB rates have actually risen.

Cape Verde does not have the sophisticated range of products that we have in UK.  Mortgages are arranged only on a ‘Full Status' basis. In other words Buy-to-Let mortgages do not exist yet. Clients have to provide proof of their income and have to show that they are able to service their existing debts as well as the new mortgage being applied for.

Mortgages are usually Capital and Interest (Repayment) loans with variable rates.  It is now possible to obtain 5 years Interest Only mortgages.  Usually the banks will allow you to borrow up to the age of 75 and for a maximum term of 35 years.  They will lend up to 85% Loan to Value (LTV), of the lower of the purchase price or valuation. The LTV attainable will usually be lower for off-plan purchases than for resale or completed units.

It is important to understand that valuations often turn out to be lower than the purchase price or market price. This is due to a number of reasons:

•  On mortgage application valuers will work on historic prices

•  Prices have risen quite steeply in recent years

•  It is also common in Cape Verde to under declare property values for transactions

•  The price paid by clients for off-plan purchases is decided at reservation, not when the building is finished or at completion

•  The legal process in Cape Verde can also take 3 – 6 months after finish of works

Clients that wish to access Cape Verdean mortgages are well advised to seek advice before committing to purchases.

On the whole, for off-plan purchases, clients will have to make the initial payments and then the bank will supply the rest up to the agreed LTV. On some developments it is possible for the banks to assist with part of the required deposits.

The banks that operate in Cape Verde do not pay commissions to Mortgage Brokers, therefore fees of £400-500 are normally charged. Banks may ask applicants to prove that funds are available for fees and taxes by placing money on account.

Cape Verde Mortgages – last updated June 08