Financing In Mexico

     Seven million North Americans travel to Mexico every year. Of that number, statistics indicate that as many as 400,000 Americans and Canadians have bought second homes or vacation properties in Mexico, with the majority investing in resort destinations such as Cancun & Playa del Carmen & The Mayan Riviera.

     Traditionally, Mexico real estate purchases have been limited to investors with sufficient resources to buy real estate without need for financing. Unfortunately, not everyone can afford to pay cash for property in Mexico. Fortunately, there are now several US-based mortgage companies that offer financing to qualified buyers who want to purchase properties in Mexico.

     Real estate financing is a relatively new phenomenon in Mexico that extends the possibility of owning a home in Mexico to many who could not otherwise afford it. In the past, North American banks were reluctant to provide mortgage financing on Mexican properties due to the foreign investors' inability to obtain title to real estate within 50 kilometers of Mexico's coastline, which is where most foreign investors choose to buy property in Mexico. 

  To circumvent this limitation, the Mexican Government implemented a system whereby Mexican banks acquire the property and place it in trust for the sole use and enjoyment of the foreign property owner, or "beneficiary." The trust, called a "Fideicomiso," assures the foreign buyer of all the rights and privileges of Mexico property ownership, including the right to remodel, lease, mortgage, or sell the property at any time. 

     Terms of the trust usually extend to 50 years, renewable in 50 year increments, which allows the buyer to bequeath the property to an heir. Due to these changes, there are now several American mortgage firms that offer financing for values up to 80% of the property 's appraised value.

     Financing residences in Mexico have inherent advantages when weighed against the additional costs associated with mortgages, i.e., origination fees, discount points, bank appraisals and processing fees. All residential transactions in Mexico (regardless of who the purchaser is) require payment of a transfer tax on the declared value of the operation (which should be the purchase price and not what the seller or developer declares to minimize the capital gains tax,) notary fees, and recording costs.

     These expenditures are the norm in any Mexican property transfer - and they are not inexpensive by U.S. standards. Foreign buyers must also pay for the permit from the Ministry of Foreign Affairs, a bank appraisal fee and an annual bank trust fee to administer the “Fideicomiso.” These expenditures are customary and required, but it should be noted that there is a distinct and protective benefit that purchasers receive in financed operations by foreign buyers.

     US-based mortgage lenders want a higher standard of assurance that the loans they originate are secure and that the public deeds vesting the bank's lien interest are in fact valid and enforceable. In order to finance Mexican residential properties, there must be a transfer and conveyance to a Mexican bank trust registered by a “Notario Publico”, which establishes a recorded and renewable 50 year beneficiary interest for the non-Mexican buyer. A simple notation is made on the Mexican trust to protect the lender and provide the lender with sufficient collateral for mortgage financing.

     Below is an example of mortgage financing lending rates, terms, and conditions for the purchase of property in Mexico. As in the U.S. and Canada, rates fluctuate with the market. 

     Of course each lender is different and other fees may apply, depending on the lender you choose. Mortgage Planning Consultants, Inc. has a thorough knowledge of financing in Mexico and can help qualified buyers obtain a Mexican home mortgage through our association with lenders who have established Mexico lending programs for U.S. and Canadian buyers.

Terms & Guidelines:      

• Our buyer-friendly “American-style” mortgage trust loan program is currently available to home-buyers at selected resorts and residential development projects in Central America and the Caribbean (Inquire with your real estate salesperson for details)
• By leveraging U.S. assets, this program provides affordable permanent mortgage loans when local bank financing would otherwise be unaffordable or unavailable
• This is different from a home equity loan and your assets are freed and returned after a period of seasoning
• Must be a U.S. citizen with U.S. assets, and net worth of at least the value of the vacation/retirement property
• Loan amounts: $150,000 to $2,500,000 USD
• 20- to 30-year amortization
• Interest rates: 7% to 9% fixed, depending upon creditworthiness
• 80% LTV; in some cases CLTV 100% may be possible
• Full-document loans; stated loans possible; loans are in U.S. dollars
• Construction to permanent financing available

• Completed and signed borrower application (Form 1003) including complete list of real estate owned
• Authorization to check credit
• Completed and signed service agreement and disclosures
• Proof of income—Salary employee: W-2s for previous 2 years; complete 2 years of tax returns; last 2 paystubs; full verification of employment, work telephone number