So, you have decided to buy a home in Mexico. Maybe a little vacation condo you can enjoy a few times a year and rent out for extra income when you are not using the property. Maybe retirement is just on the horizon and the thought of a tropical home in paradise is your reward for all those years of hard work. Or perhaps you’ve been living and working in Mexico for a while now and it’s time to stop renting and take the plunge into full-fledged home ownership or just simply to trade up or down to a larger or smaller home. We’ve got you covered.
15 years ago there were very few, if any home loans available to vacation, investment or retirement buyers. Today there are options. It is possible you have heard that mortgages weren’t available or that they were expensive or too complicated. Not true. There are a few extra steps when obtaining a mortgage in Mexico and interest rates and closing costs can be a bit higher than north of the border – there have never been more options and better terms than right now.
At Mexlend we offer 4 different types of Home Loans. Each has it’s pros and cons and each has different qualifying requirements.
Which loan program we direct you to, depends on your circumstances. We will ask you the following questions to begin: Are you a Mexican citizen? Are you a permanent, tax-paying resident of Mexico? Are you a Mexican citizen living and paying taxes in the US, but want to buy a property back home? Or, are you a Canadian or US citizen who wants to buy in Mexico and using your income and credit from back home to qualify for the Mexican loan? Each of these categories has a specific answer as to where we concentrate our efforts to make your dream a reality.
If you are a Mexican citizen or tax paying resident of Mexico, we can prepare your file for success with either a Mexican bank or Investment Fund in Mexico. Mexican bank rates are higher than any offered in the US or Canada. Their banking industry is independent of government support, and therefore are more like the rate in the US and Canada up until the 1990’s.
If you are a Mexican citizen or a tax-paying permanent resident of Mexico, you have the most options. You are eligible for all of the programs and loans that we represent. We will start with the loans with the longest amortization periods, which are the Mexican bank loans.
Mexican Bank loans:
- Minimum down payment: 10%
- Interest rates: 8% to 13.6% depending on the bank and down payment
- 20 year fixed rates are available
If you are from the USA or Canada and need to use your income and credit from back home, we have two options for you: Mexican peso loans through Mexican Investment Funds and USD loans from our Peer 2 Peer private individual investors.
Mexican Investment Funds:
- Minimum down payments: 30%-40% depending on the investment fund
- Annual cost in lieu of interest rate: begins at 2.6% and increases over the term of the loan to 9.5%
- 9 and 15 year loan terms depending on which firm is utilized
US Dollar Loans through the Mexlend Peer 2 Peer Investment Club:
- Minimum Down Payment: 35%
- Interest Rate 12% to 16%
- 5 year interest only with balloon payment.
If you are a Mexican citizen living in the USA and paying taxes in the US with credit in the USA, we have a specific program that is geared for you.
Mexican Peso loans for Dual Nationals—Mexico and the USA:
- 10% minimum Down Payment
- Interest rate 11.1%
- 20 year fixed rate available
Many buyers in our market apply for lines of credit or cash out refinancing mortgages on their properties in the USA and Canada. While this is an option that can be less expensive, it does not afford you with the protections that having a mortgage specifically for the Mexican property can afford you. There are three very specific and important protections that you buy yourself when you finance here in Mexico.
First, you are not tying up a large amount of money in a fixed real estate asset. You are closing with a loan, which will allow you to keep a minimum of 60% of the cash in a liquid position or in investments that are growing at a faster pace than the appreciation of the property here in Mexico.
Second, it is much more safe to close on a property versus all cash. In order to close on a property purchase with a loan in Mexico, the lender has their legal team pouring over the documents to ensure that everything is correct. This is in addition to your realtor, the notario and the trust bank. You have a partner in this purchase who has as much or more than you to lose, so you can be sure that they will perform a greater due diligence on the legal documents and value of the property. An all cash sale can close, leaving a myriad of legal issues trailing after them that can take years to put right. This is simply impossible with a financed transaction.
Third, but not last is that loans in Mexico stay in Mexico. In otherwords, your Mexican mortgage is not reflected on your credit back home in either the USA or Canada. Should you have a family emergency, a health emergency, or any issue, including an unforeseen world-wide pandemic, your credit remains pristine back home. You still have the ability to obtain a line of credit or a loan against your property or a personal loan in Canada or the USA to get you through the tough times. If you have used up a block of that credit in your home country you are putting yourself in a precarious position for the future.
The insert is an estimate of a purchase with a loan. The lender fees are high because they are offering such a low introductory cost for the loan of only 2.6%. Also, there is no prepayment penalty on this loan, so they are protecting their investors in an environment that in which banks have starting rates at 8%. Think of it as buying down the rate. Another interesting component of these loans is that from the first month, you are making large payments towards the principle of the loan. In a regular mortgage, you will not significantly touch principle until the 5th year. The following is a sample of closing costs at a purchase price of $300,000 USD.
The costs of your mortgage should be tax deductible for you as well, which even further reduces your expenditure.
For 15 years we have been helping hundreds of clients to finance their dream homes in Mexico and we feel that right now is a terrific time to make that move. Do so safely and with confidence with an AMPI realtor and a loan you can depend upon.
Written by David Schwendeman
President MexLend Mortgages
USA Office: 917.779.9031
Mexico Office: 011.52.322.222.7377
Taniel Chemsian is a Senior Sales Associate at Timothy Real Estate Group, representing some of the finest properties and condominium developments in Puerto Vallarta, Mexico. – with a reach that spans the globe from his base in this seaside Pacific Coast tropical resort destination. Taniel specializes in matching luxury clientele with the perfect second homes vacation getaways, income properties, and retirement residences, Taniel helps make his client’s goal a reality.
His strong market presence and track record for excellence did not go unnoticed by the producers of HGTV’s popular real estate series, “House Hunters International.” Taniel has become a regular on the series, featured on the show more than any other agent in North America.
Taniel is a long-standing member of AMPI (Mexican Association of Real Estate Professionals) – Puerto Vallarta Chapter, and a registered International REALTOR® with NAR International.
Shortly after relocating to Puerto Vallarta, he joined the area’s most prestigious real estate brokerage, Timothy Real Estate Group, where he became the Senior Sales Associate.
Throughout the years, Taniel has developed an unparalleled knowledge of the local Puerto Vallarta market along with a strong philosophy of transparency, integrity and professionalism. Along with using the latest tools and technology available, this combination has led him to consistently deliver the best results for his clients and earned him a reputation for being one of the area’s top producing real estate professionals.