Read all about the financing options available for your dream investment in Puerto Vallarta and Banderas Bay as we answer your questions like: Can foreigners get a Mexican mortgage? What is the Mexican mortgage market like? What are the conditions for borrowing?
The availability of mortgage financing in Mexico today is substantial - at least for Mexican nationals. With less than 15% of the existing housing stock currently financed with long-term mortgage loans, the institutional and governmental financing sources are almost unlimited, meaning the potential market for new mortgage financing is set to rocket.
Mortgage financing and loans in Mexico are always granted in Mexican pesos with the potential for loan-to- value ratios of up to 90%, with fixed rate interest plans. Current interest rates vary from between 10% and 12% per annum with some banks offering lower rates depending on credit ratings and eligibility. Interest rates can also be fixed for up to 20 or 25 years. The qualification requirements are very similar to the underwriting standards one would expect anywhere: strong credit score, consistent and verifiable bank deposits, tax returns and professional appraisal.
Mortgage financing availability for non-nationals purchasing property in Mexico is not quite as accessible as it is for Mexican nationals. Over the years there has been a history of lending institutions that have come and gone, never to be heard of again, most of which were US companies, although there were some Mexican firms. Among the difficulties encountered by these lending institutions were the lack of clear and reliable credit reporting services (now not a problem in Mexico), verifiable appraisals and, in the event of default, the very lengthy foreclosure process involved, which was usually the last straw for a lot of these lenders.
Today there are still a few mortgage lending options for non-nationals, including Americans, Canadians and Europeans:
Attempt to negotiate a seller take-back agreement with the seller of the property from whom you are planning to buy. The difficulty with these types of loans is that they tend to be of short duration and often require the purchaser to pay close to full asking price as an incentive for the seller to accept the negotiated terms.
Begin the application process with one of the Mexican banking institutions that are currently offering mortgage financing facilities to non-nationals. This is typically a 2 - 4 month exercise and requires that the non-national be able to exhibit the following documentation:
Providing that all of these documents are in good order, the borrower should be able to qualify for a mortgage of up to 90% of the value of the purchase price with a fixed rate of about 10.5% per annum for a 20-year term. This process can sometimes be time-consuming, trying, repetitive and inconsistent. However, it is possible to achieve.
Option 3 has similar requirements as option two, only much faster via a private lender, albeit with a much higher interest rate of approximately 14% per annum, a 5-year term and a loan-to-value ratio closer to 50%.
Today, only about 5% of the real estate transactions that take place in and around the Puerto Vallarta area have any kind of direct mortgage financing involved, as the majority of buyers find it much more efficient and much less expensive to arrange financing in their home country based on the assets they already have there.
For more guidance on mortgage financing, contact us at one of our offices.