New Pension Withdrawals for Mortgages, Home Purchase or Construction

Buying & Selling, Featured

Effective December 9, 2023, the Cayman Islands government updated the National Pensions Act which increased withdrawal limits from private pension funds for mortgages, home purchases or construction. I thought I’d take this opportunity to outline these changes, as well as specify who can benefit from this new law.

How can funds be used?

The withdrawal of pension funds can be used in a variety of ways. People who are not current homeowners can use pension funds as a deposit for buying or building a home or condominium. The means you can use funds as a deposit on pre-construction, during construction or for a new existing home.

Pension funds, if you aren’t a current homeowner, can be used as a deposit to purchase residential land.

People can also use their pension funds to make a reduction payment on their primary residence’s mortgage or residential land loan, and if applicable, any arrears in strata fees related to the property.

Pension funds can also be used to pay off an existing mortgage.

Who is eligible?

These amendments apply to Caymanians and status holders only.

How much of my pension can I withdraw?

The maximum amount a person can withdraw ultimately depends on the purpose. If you are making a deposit or reduction payment, you can withdraw up to CI $50,000, but for paying off a mortgage, you can withdraw up to CI $100,000.

Do I have to repay the amount I withdraw?

The short answer to that is yes. If you withdraw funds for property purchases, you will need to contribute an additional 3% monthly towards your pension until the normal age of retirement or until the funds are repaid in full.

How do I access my pension?

The first thing you need to do is complete the DLP National Pensions Acts Property Withdrawal Application and reach out to your individual pension plan provider for further information and instructions. Once everything is complete and submitted, pension plan administrators have up to 60 days to make the disbursements.

Stamp Duty

With the recent changes to raise the stamp duty exemptions for Caymanian home buyers, which I outlined in an earlier article, I thought I’d also give some key information with respect to stamp duty in the Cayman Islands.

The stamp duty rate in the Cayman Islands is 7.5% on the purchase price or the market value of the property, whichever is higher and is calculated in Cayman Islands currency. Stamp duty is not payable on the furnishings or chattels of the property. Payment must be paid within 45 days of possession, or the land transfer documents being signed and is payable by the buyer unless the contract states otherwise.

With respect to land, if you pay stamp duty at the time of buying raw land you only pay on the land value and not on any completed building. This is great if you don’t plan to build right away or just want to bank the land. There are no time restrictions as to when you must build, unless specified in the purchase agreement, which may occur in the case of select subdivisions.

In December the Cayman Islands government announced that it was considering an increase in stamp duty for high-end properties in certain areas, but it appears this plan is being re-considered as indicated by Premier O’Connor-Connolly at the Chamber of Commerce Economic Forum last Friday.

As you can see from the above, changes can occur regularly and quickly that directly impact the Cayman Islands real estate market. This, coupled with ongoing interest rate changes, can be stressful for many buyers especially first time Caymanian buyers.

Our team at Bovell is here to help answer any of your questions and we pride ourselves on being as up to date as possible on any and all changes. If you have any questions about the new pension withdrawal rules, stamp duty changes or any real estate questions, please do not hesitate to contact myself or my team at +1 345 945 4000.