So you are retiring, and you dream of a retirement or second home in warm and exotic locations in the Mexican territory. There are plenty of reasons for this. For instance, Mexico homes for sale are often cheaper to purchase and maintain than the ones in the United States or Canada. Also, the cost of living in Mexico is much more reasonable as well because services, healthcare, food, and leisure are more affordable than back home.
There is also a general concern that savings could not be enough to cover the price of their new home. Many Americans and Canadians are looking into investing in a Mexico retirement home. Then, what should non-Mexican buyers need to do to get financing for their dream?
What type of loans are available for foreigners in Mexico?
Often ex-pats have several questions about the options they have for financing Mexico homes for sale. For those interested in investing in Mexico real estate, there are options available so you can decide which one fits your needs and desires the best.
The real estate market in Mexico is a cash market. 90% of American buyers in Mexico pay cash for their properties. However, if you need a loan to cover the total price of the property, there are still several options that many investors don’t know about.
Financing to buy Mexico Homes for Sale
Some buyers can afford to purchase a property with their retirement savings account. You can take your capital and decide where to invest it. In Puerto Vallarta, Playa del Carmen, or Cancun you will find properties that offer up to a 15% guaranteed ROI. Plenty of people find this to be an attractive option!
Financing with a Mexican Bank
There are only some banks where you can have this option because they have to investigate your credit history, earnings, and payment capability, among other things, in your home country. Sometimes this investigation is complicated for them. But the financial institutions that do it will offer the best option available for you. You can compare the best interest rates and factor them with the property’s ROI (Return on investment) you are interested in purchasing.
Foreigners can get a loan or credit with very few Mexican banks of up to 50% of the property’s value appraisal. It follows the same steps to get a mortgage as a Mexican citizen. However, interest rates will be higher in Mexico, around 5.7% to 9.7%, than in the US and Canada. However, there are several benefits of financing your property in Mexico’s financial institutions.
First, you may have complete legal certainty from the bank where you are getting the mortgage. Second, the exchange rate will, most likely, be in your favor, and you can derive income in US dollars from buying a property that clients rent in USD, whereas your mortgage is in Mexican pesos.
Also, securing a loan in Mexico will not impact your credit score back home. You may have earnings you didn’t know you could have. Most importantly, you can deduct taxes on the mortgage interest you have paid in Mexico.
Financing in the US or Canada to purchase a home in Mexico
There are many Americans and Canadians that have used this option. If you refinance a new loan, you can secure a 4.2% to 2.7% fixed interest rate, which is the lowest interest option we have found at present.
If you own a property, you most likely have equity in your home. You can take that. It is a very simple process, and you can get something around a 6% fixed interest rate.
The Home Equity Line of Credit (HELOC) is a more flexible option to take money out as you need it. The interest rate might be variable, and, evidently, it will all depend on your equity and your credit score.
Finally, depending on the area of Mexico you are interested in, a foreigner can purchase a Mexico beachfront property (in the restricted area) in two ways: through a bank trust (Fideicomiso) or by registering a Mexican corporation.
Those buying using an individual retirement account or with the help of financing may want to look into the bank trust option.
In conclusion, working with a professional knowledgeable about the area and knowing which options are available to you is essential. Even better, you have several options to get a loan for buying the house of your dreams.
Now, if you have any question about Property Financing or if you are interested in any of the Top Mexico Real Estate properties we have listed anywhere throughout Mexico, please feel free to contact one of our representatives and we will be glad to help you find your dream.