Mortgages in Mexico not Readily Available
Financing in Mexico has always been an
issue. Although there currently is some financing you will not find anything
comparable to what you can get north of border. However, for some people the
Personal Loan approach below might be beneficial, especially if using for short
term while trying to sell your home north of the border or waiting for other
investments to mature.
Vendor take-backs are also not common but
on occasion are done. Rent to purchase agreements are almost unheard of.
Overall, creativity in real estate or
financing is not very present in Mexico. Therefore, mostly people purchase with
cash or do an equity take out from their home north of the border or borrow
from their bank back home on a line of credit to purchase in Mexico.
U.S. or Mexican Bank Financing
For a few years we did have G.E.
financing in Mexico but for whatever reason, they no longer have a presence in
U.S. or Canadian banks will not finance a property in Mexico
using the Mexican property as collateral as would be too difficult for them to
foreclose from a distance if someone defaulted.
Mexican banks do have mortgages but for
foreigners to qualify they need to earn their income in Mexico. The interest
rates are 10% or more.
Since it is difficult to find a place to
put your money to earn a decent rate of return, individual investors are
offering private financing by way of personal loans in order to get a higher than average return on their money. The minimum loan is
$25,000 U.S. with a term up to 5 years. They will finance 50% of the value of
the property. Consequently they require no credit report or appraisal as there
is lots of equity in the property should something go wrong. They do require
proof of sufficient income to cover the payments. The interest rates vary from
10 to 13% and some also have a set up fee of 5%. It is not cheap. However for
Americans, you are able to write off the interest on a property in Mexico just
as you would on a property in the U.S.
A traditional mortgage is registered on
the property for security.
Vendor Take Backs
There are a few developers that do offer
Vendor Take Back financing. Interest rates and terms vary depending on the developer
but would be someone similar to the private financing above.
Occasionally an individual homeowner will
agree to do a Vendor Take Back and often the terms and conditions are a little
better than the private or developer financing.