Page 34 - EQ Mag-2019

REAL ESTATE INVESTOR RESOURCES
REAL ESTATE IN MEXICO AND FINANCING OPTIONS FOR FOREIGNERS
By: Dolores Pérez Islas, CEO
roperty prices in Mexico have risen substantially
in recent years, especially the coast and colonial
Pcities, but value may be sought with time and
patience, for example some coastal properties in
Mexico still trade far more affordably than coastal
properties in the US or Canada. Properties in
Mexico can also offer an annual rental
income, depending on where the
properties are situated. Whatever
reasons you may have, a property
investment in Mexico can offer
good value for your money; but as
with all property investments, you’ll
need to do your homework first.
Historically, the overwhelming
number of real-estate deals in
Mexico have been settled in cash.
However, with the stabilization of
currency markets across the world,
Mexican Banks are now beginning to offer
mortgage products for the purchase of real-estate in
Mexico, although significant deposits are required and
interest rates are not as attractive as those in the US,
Canada and Europe.
While traditionally these transactions would be
conducted in cash, there is now increasing availability
of financing for property, both in Mexican pesos and US
dollars. The Mexican mortgage market already shows a
certain degree of maturity, but to consolidate that
process, people should think of mortgage credit as an
additional tool to build wealth and as part of their
personal and family finances, rather than just a liability
or a debt. There have been important changes in the
market. Maybe 10 years ago 98% of the loans that
were given, including banking, had to do with buying
new housing; currently, approximately 40%
corresponds to the acquisition of used housing, and
within other items are the financing of remodeling,
individual construction, completion of work, liquidity,
financing of liability payments and improvement of
conditions. In short, it can be said that there is a
certain maturity and also a greater specialization in
financing for housing in Mexico, which is positive for all
of us who participate in the industry.
Even if you as a buyer has the ability to pay cash for a
property, it might makes sense to not tie up a lot of
cash to purchase real estate overseas, for that
reason, here are some financing options:
Developer Financing
Real estate developers, especially
those catering to foreign clients,
generally offer a few financing
options to potential clients. Most of
the financing options will require
20% – 50% down, with the balance
to be paid within 3-5 years. Interest
rates will vary, most rates fall
somewhere between 5% – 10%. If you’re
on a tight budget and you don’t need to
move into a place in Mexico right away, you
might want to consider buying something from a
developer pre-construction. You can save about 20%
off the price of a finished unit and it’s generally easier
to get developer financing. If you do choose to buy a
unit pre-construction, you’ll still need to have capital to
put down to make it work. Here’s a pre-construction
payment plan taken from an unnamed development:
* 30% down payment at the time of the contract
* 20% due at the time of delivery
Financing starts after delivery 50% of the value
financed over 36 months at 8% interest
Cross-Border Finance Companies
There are companies that specialize in offering
mortgages to Americans and Canadians who want to
purchase property in Mexico. You can find several by
doing a Google search for “cross border mortgages
Mexico”. This is a popular option for many future expats
because these companies offer terms that closely
mirror traditional mortgages in the U.S. and Canada.
There are a few things to keep in mind when using one
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