BY CONNIE BEZEREDI
The majority of purchasers of real estate in Mexico are buying with cash at the closing and possession of the property. They may be using a line of credit at a low interest rate, cashing in stocks, bonds or mutual funds in their home country or they may be selling a property and using the proceeds to pay cash in Mexico.
There are several options for financing real estate in Mexico but, generally, lending from Mexican institutions for foreigners is limited.
There are loans for foreigners with permanent residence in the USA or Canada and purchasing 2nd homes in Mexico. You could also be from the USA, Canada or Mexico or from another country and request a loan in pesos, a US or Canadian citizen for a loan in US dollars, or from the USA, Canada or Mexico or another country with permanent residence in Mexico for a peso loan. Your current credit history from your home country will pre-qualify you for the lender with a minimum credit score of 620 or higher. Usually, the down payment is 30 to 40% of the purchase price. Some lenders have a minimum loan amount or a minimum selling price of the property they are willing to finance you on. Interest rates can range from 2 to 4% or from around 7 to 12%.
If you are a Mexican citizen living and working in Mexico, or a working foreign permanent resident with income derived from Mexico, and you have and least two years of history with your Mexican bank and credit history in Mexico, you can apply for a loan at a local Mexican banking institution. You will need to have your down payment and the Mexican bank loan will be in pesos. If your property of interest is listed for sale in US dollars you will need to exchange your pesos to pay the seller in dollars at closing. Peso loans are expensive, and interest can be up to 14% depending on the lender. The term of the loan could be 10, 15, 20 or 25 years. The lender will be the first named beneficiary of the property and the purchaser as the second beneficiary holder on the property until the loan has been paid off in full at which time you can have the lien removed. You can sell the property, but the loan must be paid in full before the title can transfer to a new purchaser.
Seller financing has been a prevalent option for foreigners purchasing 2nd homes in Mexico for many years. The seller may ask for credit history from your home country to determine if you are a viable candidate for them to do business with. The term of the loan is generally short-term, usually from 1 to 5 years. In some cases, you may find a seller who will agree to a longer term, perhaps 7 to 10 years, but the shorter term is much more common in about 99% of sellers who would finance. Interest rates average from 4 to 8% and most sellers will agree to a no pre-payment penalty if you want to pay your loan off early or place lump sums towards the principal. The best option is to have the title transferred to you and a lien placed on the title in favour of the seller and then, with proof of your payments in full at the end of your loan term, the lien can be removed. With the seller offering to finance you, he/she will expect in return a decent interest rate and low discount on the selling price of the property. You may sell the property with the seller financing loan paid off in full. The lien must be removed before transferring the title to a new purchaser.
In the area of Mexico that I sell real estate in, Baja California Sur, Los Cabos, some of the lenders available are CBI Cross Border Investment, MOXI, Intercam, Veltra Capital, and Seaport Credit Canada.
Contact me for more information. firstname.lastname@example.org 480-393-0639 Whatsapp +52 624 122 2237