The majority of Mexican real estate deals have been settled in cash in the past. With the stabilization in the Mexican peso, and the increase in international property sales worldwide, it is possible to obtain mortgages for Mexican real estate purchases from both Mexican and international banks. It is extremely important to understand your financing options before owning property in Mexico.
The first thing to consider when financing your Mexican property with a mortgage is whether to get a Peso-mortgage (i.e., a Mexican mortgage) or a foreign-currency-mortgage (i.e. A dollar-denominated mortgage from an international bank. There are many “cross-border” mortgages that allow you to take out a loan in another currency, and then secure it through Mexican property. This is due to increasing interest in Mexican properties.
Mortgages Using Mexican Pesos
An FM2 visa (migrant visa) is required by most Mexican banks to prove that you are a Mexican resident. Some banks will accept you even if you do not have an FM3 visa (non-migrant). This proves that you are financially stable enough to own a home or start real estate investing in Mexico.
Although banks in Mexico are expanding their mortgage lending, it’s still difficult to get a mortgage. Even with excellent financial records, most banks won’t finance 100% of the property’s value. Most mortgage loans are only available for a maximum of 20 year terms. The interest rate on mortgages in foreign currencies is generally higher than that of fixed-interest mortgages.
Mortgages Using Foreign Currency
International banks, often with Mexican subsidiaries, and specialised mortgage firms provide foreign currency mortgages for Mexican properties. These ‘cross-border loans” are primarily for US and Canadian citizens who want to purchase property in Mexico. However, there are some European mortgage providers that can be used for Mexican estate.
For Mexican estate, foreign currency mortgages are available for 3 to 30 years and can be limited to 75% of the property’s value. Banks will often require a minimum loan amount of $100,000 US dollars in many cases.
Different banks and mortgage providers have different interest rates and they can be linked with international benchmark rates which are generally lower than mortgages using Mexican pesos but higher than property mortgages in the US or Europe.
What You Need to Remember About Paperwork & Fees
A mortgage can have a number of charges, including credit scoring fees, commissions, and charges for property insurance. There may be penalties for late payment on some mortgage products. This information should be checked in advance if you are considering early repayment of your mortgage.
Banks will need proof of income, credit history, bank references, and statements from the most recent months, as well as your official identification and your immigration documents (if applicable).
Mortgage approvals can take several weeks even if the bank tries to speed up the process. Even if your bank has technically given you a yes, it may still take some time before the final paperwork is completed and the loan can be released. This is something to keep in mind when negotiating a time frame for a property purchase. You don’t want to be penalized for breaking a purchase contract that was not realistically timed.
Owning property in Los Cabos is an exciting prospect, but you’ll need to know what your financing options are before signing on the dotted line. It’s important to speak with a real estate agent who can help find out which mortgage companies will work best for you and your situation so that you have all of the information necessary when making this decision. They should be able to provide insight into how mortgages function in Mexico as well as whether or not they’re available from banks both locally and internationally. Don’t take any risks–talk to one today!