A guide to housing loan in Mauritius
Commercial banks in Mauritius offer a wide range of services, from traditional banking to more specialized facilities. Any citizen from any compliant jurisdiction may apply for a bank account opening and subsequently apply for a home loan for the acquisition of a residential property in Mauritius, subject to the Non-Citizen (Property Restriction) Act 1975.
The applicant will first make a formal or informal request to a bank which will respond with a term-sheet detailing the terms and conditions. Should the applicant be agreeable in principle, a formal home loan application will be made via the banker. The bank will then assess the loan application, as in any credit application, based on the applicant’s repayment capacity, security provided and credit history, among other relevant factors. Should the credit application be approved by the credit committee, the bank will issue an official offer letter – to be signed in two copies.
Broad criteria used to assess the appeal of a bank’s proposition for a home loan
- Pricing – the interest rate;
- Term – the period over which the loan will be repaid;
- Security – mortgage of the property, insurance cover, debt-service reserve;
- Loan to Value Ratio (LTV) – to determine the equity contribution required from the applicant;
- Repayment type and frequency – amortised, moratorium period, bullet repayment, monthly-quarterly-yearly, etc. Banks may usually tailor-make the formula depending on the financial situation or objective of the applicant;
- Application Fee;
- Early repayment clauses.
How to decide in which currency to borrow?
Bank A |
Bank B | Bank C |
Bank D |
|
Pricing | ||||
EUR | 1-month EUR LIBOR + 5% p.a | 3-month EUR LIBOR + 3.75% p.a. | 1-month EUR LIBOR + 3.5% p.a | 3-month EUR LIBOR + 3% p.a. |
USD | 1-month USD LIBOR + 5% p.a. (i.e 7.07% p.a.) | 3-month USD LIBOR + 3.75% p.a. (i.e. 6.06% p.a. | 1-month USD LIBOR + 4% p.a. (i.e. 6.07% p.a.) | 3-month USD LIBOR + 3% p.a. (5.31% p.a.) |
MUR | PLR (i.e. 5.75%) | PLR – 1.01% p.a. (i.e. 4.84% p.a.) | PLR – 1.70% p.a. (4.8% p.a.) | PLR – 1.1% p.a. (i.e. 4.95% p.a.) |
PLR | 5.75% p.a. | 5.85% p.a. | 6.5% p.a. | 6.05% p.a. |
Maximum Term (years) | 15 | 15 | 15 | 10 |
Security | 1. Debt service reserve equivalent to 1-year interest 2. Fire & Allied Insurance 3. Death & Permanent Disablement Insurance | 1. First rank fixed charge (mortgage on property) 2. Building Insurance 3. Death & Permanent Disablement Insurance | 1. First rank fixed charge (mortgage on property) 2. Building Insurance 3. Death & Permanent Disablement Insurance | 1. First rank fixed charge (mortgage on property) 2. Building Insurance 3. Death & Permanent Disablement Insurance |
Maximum Loan to Value (LTV) | 60% | 50% | 70% | 60% |
Repayment | Amortised Can offer moratorium period during construction phase | Amortised | Amortised Can offer 1-year moratorium period | Amortised |
Application Fee | USD & EUR: 1% (min. USD3,000/max. USD10,000 MUR: 1% (min. MUR1,000/ max. USD25,000) | 1% (max. MUR25,000) | 1% (negotiable) | 1% (negotiable) |
Early Repayment Penalty | 1% (not applicable if repayment is from own funds) | 1% (not applicable if repayment is from own funds) | 1% (negotiable) | 1% (not applicable if repayment is from own funds) |
Other costs to expect when purchasing property in Mauritius*
It may be advisable to preempt and consider the additional charges when purchasing property in Mauritius.
These are:
- Registration Duty: 5% of the acquisition value, payable to the government of Mauritius.
- Notary Fees: Sliding scale of 2% for the first MUR 250,000, 1.5% on the next MUR 500,000, 1.0% on the next MUR1m and 0.5% on the remaining amount. For a property costing USD 500,000, the charge should be roughly 0.57%.
- Agency Fees: Agents would generally charge 2% on the acquisition value; Insurance: Other than being a necessary comfort to have, banks’ home loan credit conditions usually insist on the property to being insured. Often the insurance would have to be in the bank’s favour prior to the loan being disbursed.
*A wise reflex when speaking to a promoter is to clarify whether these costs are included in the displayed price. The general rule for properties showcased by ENL property are all inclusive, i.e. the price one sees, would be the price one gets.
Refinancing Options
Should an applicant wish to transfer an existing home loan from one bank to another, in the case of a better offer for example, it may be possible to refinance the loan. However, the applicant would have to consider the penalty charges that may apply.
Penalty charges may significantly outway the marginal benefits of refinancing.