Home Mortgages in Mexico are Available
Until recently, property purchases in Mexico were done with cash. Mortgages in Mexico were either not available or the interest rates were prohibitively high. In just the last couple of years, it has become possible to obtain reasonable financing using the property in Mexico as collateral.
Primarily, mortgage applications are handled through authorized brokers located either in Mexico or the U.S. There are several to choose from and they can be located through an online search. The primary lenders are G.E. Finance, Scotiabank (for Canadians) and locally through BBVA Bancomer through their subsidiary Compass Bank. These loans are usually in US Dollars but peso loans are also available.
The application process is pretty much the same as you would go through at home and the qualification requirements are similar. Full documentation and proof of income is required.
Loans are available from $100,000.00 up to $5 million and the normal loan to value ratio is 70% though this can vary depending on the type of loan. Amortization can be from 15 to 30 years and a minimum credit score of 680 (or Canadian Equivalent) is required.
Interest rates will vary depending on the loan amount the type of mortgage selected and the applicant’s credit score but will generally be in the range of 7.5% to 9.5%.
These mortgages are available for Houses/Condominiums that have been built. Pre-construction financing can be arranged but the rates will be different during construction. When the property is built, the loan will be transferred into a standard mortgage.
One of the conditions for a mortgage is that the title must be registered through a Fidecomiso (Bank Trust—see Real Estate section for an explanation on this) where the loan and conditions can be registered. This trust will have a set-up fee and an annual management fee of around $500.00 per year depending on the Bank. Other fees apply such as origination fee, appraisal fee, insurance and other costs and can be between 2.5% to 3.5% of the loan amount. These fees are in addition to the normal closing costs for the purchase.
Most of the Brokers will have an online application process and you can get pre-approval through their websites.