You spend the time finding your perfect home or investment property. You settle on a purchase price, sign a sales agreement and then wait to close. The closing process is similar in Mexico as in the United States. The difference is that in the US, the buyer and seller use a Title Company to close the deal. In Mexico, the two parties sign their closing paperwork in front of a State or Federal-approved Notary. When the day comes to sign for your new real estate purchase, the buyer will most likely have to bring additional funds to cover various closing costs.
Closing Costs Differences
Depending on taxes, certificates and other miscellaneous expenses, closing costs will vary between the USA and Mexico. The closing procedure between the two countries are very similar including prepays, third-party charges, taxes, and closing fees collected by the Title Company (USA) or Notary (Mexico). Generally speaking, in the United States the purchaser can expect to pay closing cost of around 3 to 3.5 percent of the property’s selling price. In Mexico, the purchaser can expect to pay 6 and up to 8 percent depending on taxes, state fees and resident status.
Comparison of Closing Costs Between Mexico and USA
Here is a side-by-side comparison of both the USA and Mexico closing fees. The closing itinerary could deviate slightly pending on the type of property, unanticipated property issues, a need for special permits/certificates or variances according to state laws. The following fees are based on a cash sale.
|USA Closing Costs||Mexico Closing Costs|
|Attorney Fee – Average $600 USD, pending amount and property type.||Trust or Bank Fee – $500-$600 USD. This applies to the selling non-resident buyers.|
|Title Company – closes the sale. The basic fee is $200, plus $2 per every $1,000 of the selling price.||Notary Fee – closes the sale. The fee depends on the selling price (.95% to .35%).|
|Recording Fees – this fee is charged for recording the purchase with the city and county where the property resides – included in closing fee.||Public Registry Rights – after the closing, the property is registered with the public records office.|
|Title Insurance – this is highly advised with any purchase. Fees do vary.||Title Insurance – this is optional in Mexico, but highly advised. Fees vary.|
|Transfer Fees – this is a tax charged and is part of the Title Company’s closing fee.||Property Acquisition Tax – similar to the USA transfer fee, it is 2% of the selling price.|
|Escrow Account – in the USA, there is no charge to obtain an escrow account.||Escrow Account – Mexico does charge for using an escrow account, anywhere between $550 and $750 USD.|
The list above almost mirrors the closing process between the USA and Mexico. It appears that Mexico’s fees are somewhat higher. There are advantages to the upfront costs Mexico charges that in the long run, will prove beneficial to the new property owner. The miscellaneous (other) fees to follow are a price you have to pay to own a foreign property. However, in the following summary there will be an outline that will point out the difference in cost of living between the two countries.
Other Mexico Closing Fees
Foreign Affair Permit
A permit that the Notary or Bank Trustee processes and can cost approximately $1,100 USD.
National Foreign Investment Registration
This is the responsibility of the property trustee and the fee can range from $350 to $800.
No Liens Certificate
This is the responsibility of the Notary to make sure there are no past or current property tax(es), water or maintenance fees or bills due. This charge is usually no more than a $100 USD.
The above charges and fees vary from state to state in Mexico. Always ask your agent to provide a Good Faith Estimate and go over it line by line with them. There are a few suggestions that could eliminate several of the permits and costs associated with the closing process. One cost saving would be if you have full resident or citizenship status. A few of the other Mexico closing fees could be waived if your residency paperwork is in order and up-to-date. Another saving is if the buyer already owns a property and has a trust already set up in Mexico and in good status.
Using a purchase price of $175,000 USD for comparison, the average closing cost for a cash sale in the US is approximately 3.5% or $6,250 USD. Mexico with the same purchase amount and not having any resident status or existing trust would be 6 to 8% or approximately $11,000 to $12,000 plus or less USD. Don’t let Mexico’s closing cost discourage you from purchasing your ideal property in a foreign country. There are many immediate and long-term advantages that will contribute to your cost-of-living when selecting to own property in Mexico. They are:
- The higher tax fees that need to be paid upfront in the closing will lower your annual property tax. The average annual tax bill will be approximately $150 to $200 USD – based on a $175,000 USD value. Compared to a same value home in the US would be approximately 1.5% or $2,600.00.
- There is no doubt that the cost of living south of the border is much less than in the US or even Canada. It is reasonable to say that the overall cost of living in Playa del Carmen, for example, is 50% or more less than in the US.
- The exchange rate between the United States and Mexico currency averages 18 pesos to 1 USD (this rate changes daily). This in itself is a saving that can be beneficial to daily purchases and entertainment.
Last but not least don’t just focus on the initial closing cost. Take time to look at the immediate, short and long-term advantages. Living monthly on your social security income and keeping your retirement funds for extra activities, offers more of a stress-free life. Need we say more?
Retire to Mexico!
If you’re considering your retirement or permanent relocation to the Riviera Maya, then you surely need to take a look at the thousands of properties we have listed on our website. Our professional Buyer’s Representatives can help you sort through them and find the perfect home for you!
And remember, at Top Mexico Real Estate…we make it happen!