Page 36 - EQ Mag-2019

REAL ESTATE INVESTOR RESOURCES (Con t)
of these services:
There is normally a minimum loan amount somewhere
in the neighborhood of $100,000 – $150,000 USD.
The interest rates are typically higher than those
offered back home.
If you are buying the restricted zone, some lenders will
not give you a loan if you choose to structure it under a
Mexican Corporation as opposed to a bank trust known
as a fideicomiso.
Down payment: A minimum down payment of 20% is
required. For the lowest interest rates, down payments
of 30% to 40% are required
 Loan Duration: 3, 5, 7, 10 years
 Term/Amortization: 10, 15, 20, 25, and 30 years
 Credit scores: Minimum of 650
 Interest Rates: As low as 6.75%, but for more
attractive down payment options and higher loan
amounts, interest rates range from 7.5% to 9.5%.
 Maximum Loan Amount: None, on a case by case
basis
 Currency: All loan programs are denominated in U.S.
dollars
 Property Use: Primary, Vacation and Investment
Properties
 Property Type: Single Family Homes, Town Homes
and Condominiums
My suggestion compare the rates and conditions of
multiple lenders. This may save you a lot of money and
35 www.equitymovement247.com
headaches in the long run.
Charges and Paperwork
As with most financial loan products, there are number
of charges and required documents to file in order for
the credit to be released.
Charges
Common charges to open a mortgage account include:
commissions, charges for conducting socioeconomic
studies of potential borrowers (which some charge you
whether or not the loan is granted), mortgage life
insurance, property insurance, home valuation and
Notary Public expenses (notary expenses are paid
direct to the notary).
Checks and Research (Paperwork)
Before they lend you the money, the banks conduct
extensive investigations of their potential clients,
including proof of income, checking the credit bureau
for your credit history reports, as well as socio-
economic studies to assess the risk of the loan.
Among common loan requirements are:
 A minimum age, usually 18 but it depends on the
bank, and not older than 70
 Proof of income (dual incomes can be considered
for couples)
 Bank references and recent statements
 Official identification and proof of address
 Birth certificate and marriage certificate if applicable
 Immigration documents, e.g. FM2 or FM3
Documents related to the property such as:
The sale contract
 Proof of down payment
 Copy of the deeds (of the land in the event the loan
is for construction)
 Copies of receipts for rates and water bills
 Copy of architectural plans
Lead Times
Banks have been improving the ‘turn-around’ for loan
approvals in recent years. Some will give a decision ‘in
principle’ (subject to further investigation) within a few
days and may release the funds within a couple of
weeks. The process can take much longer, though, so
you should be prepared for this.
Don’t get yourself into a non-negotiable or time-limited
contract to buy a property on the basis of a loan given
‘in principle’ as the bank may take longer than you
expect to complete the necessary checks and may
even refuse the loan at the eleventh hour.
Even when the loan is agreed, it can take up to several
weeks for the bank to release the funds. The key thing
to keep in mind is: stay flexible and don’t paint yourself
into any binding (time limiting) contractual agreements
before the funds have been released by the bank.
Considerations when Financing Mexican Property
For people who have dollar incomes, the idea of
borrowing in pesos may appear attractive, given the
possibility of the peso depreciating against the U.S.
dollar, which would lower the payments (and overall
debt) in the future in dollar terms. While exchange and
inflation risks are already factored into current peso
lending rates, banks appear to be fairly confident that
there won’t be a massive rise in local interest rates,
hence the fixed-rate loans over periods as long as 15 or
20 years.
While that’s no guarantee that there won’t be a surge
in interest rates, it’s also possible that a peso loan
could work out more expensive over the life of the loan,
if there’s no significant devaluation. The sharp
devaluations and surges in interest rates such as those
that caused banks to pull out of the mortgage market
almost entirely in the mid-1990s aren’t expected to be
repeated. One indication of this is that the Mexican
government is currently borrowing money in pesos from
10 years to 30 years at less than 8% a year.
A number of Mexican banks, in particular, have
incentive schemes in place offering, for example, rate
discounts for prompt payment. However if you miss a
payment the discount rate disappears and the higher
rate may be applied retrospectively to the loan.
Some schemes offer lower rates of interest at the start
of the loan (“teaser rates”), but these are usually off-
set with slightly higher rates later on. It’s important to
consider the cost of financing over the entire term in
order to understand the true cost of the product being
offered to you.
Most (but not all) mortgage products sold by banks
have no penalties for early payment. Check the small
print before you agree to the loan if there is a chance
that you may want to repay the loan early; for example,
if you sell the property or pay-off the loan with the
maturity of a different investment.
The best advice when considering whether cash or
mortgage makes the most sense is to opt for the
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