financing property In Mexico
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What you need to know
Not everyone can afford to pay cash for a dream home in Puerto Vallarta. Fortunately for the rest of us, financing here is available. Although rates and fees are slightly higher than in the US, you can now take out a loan against your Puerto Vallarta property, rather than tie up valuable home equity in the US. Mortgage financing in Mexico extends the possibility of a second home in paradise to many who could not otherwise afford it.
Savvy investors understand the benefits of leverage (using the “other guy’s” money instead of their own) which decreases the necessary cash investment and increases the yield on their invested cash. Here are some basic guidelines to consider when applying of a mortgage on your property in Puerto Vallarta. Who can apply for loans? Currently, there are programs for Canadians, US Citizens, Mexican Nationals and foreigners who earn income in Mexico.
What types of loans are available? There are purchase, permanent loans for pre-sale condos at time of transfer of title, cash-out refinance, lot loans (in gated communities only) and construction loans for single family residences. There are also ARMS, Balloons and fixed rates available.
What is the amortization period? Up to 20 years.
What are the current interest rates? 9.6% – 11% (this may seem high to foreign borrowers used to very low rates, but remember, this loan is in pesos, which has traditionally deflated against the US and Canadian dollars. When these foreigners go to pay off the loan in their home currency, there is a very good chance that this amount will be lower in that currency, reducing the effective interest rate.
How much is the minimum down payment required? 15% – 40% depending on borrow qualification.
What are the loan terms? 7-20 years.
What are the qualifications? The borrower must have FM (Migratory status) in Mexico. Most migratory status applicants need to provide the following documents: 3 months of bank statements (with minimum $1,500 USD monthly deposits), passport, FMT, (the tourist card foreigners receive on the airplane when flying into Mexico) and an address in the Mexican city where they are applying for their migratory status. I recommend that borrowers review information provided by the Mexican embassy/ consulate in their home country: Mexican embassy in the US: http://portal.sre.gob.mx/was_eng/ Mexican embassy in Canada: http://embamex.sre.gob.mx/canada_eng/
Also of note, there has been no “grace” period required; you can apply for a loan the day after you receive migratory status.
What is the minimum FICO credit score? 650 or above.
What is the maximum debt-to-income (DTI)? The borrower cannot spend more than 40% of their monthly income on mortgages, credit cards, car payments + the proposed mortgage.
What is the average closing time? 60-90 days. There is NO FEE for pre-qualification unless a credit report is pulled with your permission.
There are several well-established loan brokers in the Puerto Vallarta market; ask your Boardwalk Realty adviser for recommendations.