The magazine for all things Ixtapa-Zihuatanejo
Serving the Ixtapa-Zihuatanejo community since 1999
Available at select spots all across Ixtapa-Zihuatanejo
The magazine for all things Ixtapa-Zihuatanejo
Serving the Ixtapa-Zihuatanejo community since 1999
Available at select spots all across Ixtapa-Zihuatanejo
Real Estate FinanceFinancing your Dream Home in Paradise
There are three questions prospective buyers of Mexican Real Estate ask. The first one is,”Is it on the beach?” the second one, “Is the price in dollars or pesos?” and the third question, “ What about financing?” In the past, real estate agents and sellers had only one answer to question number three and that was “all cash.” For the past year and a half American style long-term mortgage financing for American buyers of Mexican properties has been available. In that time loan programs have adapted to the demands of buyers as more lenders have entered the market and more products have been offered. Between October 2005 and today, we have seen the introduction of the Stated Income Loan, Light or Alternative Documentation Loan, Cash-out Refinances and even more than one choice for a 30-year fixed rate loan. Rates range as low as 7.25 percent for an adjustable to 9.50 percent for some fixed rate products. There are loans to purchase building lots, construction loans and even loans for fractionals. Down payment requirements range from 20 to 30 percent. And in November of 2006, the first dollar-denominated loan for a Canadian using Canadian income was funded in Cancun. One of the stumbling blocks for lenders was an instrument that would allow them to foreclose on the property in case of default. With the development of the guarantee trust, an adaptation of the existing fideicomiso, that names the lender and creating their lien on the property, the road was cleared for large scale mortgage financing. This means that only the Mexican property will be used for the loan collateral. Risk is always a consideration for a lender when making a mortgage; this applies in the U.S., Canada, Mexico or anywhere that a loan will be made. The guarantee trust, and American title insurance provided by companies like First American and Stewart Title have reduced the lenders’ risk. The profile of the borrowers themselves helps reduce the risk. Nationally and internationally the second or vacation homebuyer has a higher credit score, higher income, and more assets than the average consumer. This is also the most demanding client a mortgage company can have. They know their value as a client, and they demand service, good pricing, and first class attention. Imagine building an industry from zero with a client base that is the most demanding. Daunting, isn’t it? Getting a loan for a Mexican property is not much different than getting a loan in the U.S. and Canada. The borrower can apply online, their credit report can be ordered instantly, and they can fax their income and asset documentation to their broker. Once the loan is underwritten and approved, all conditions can be sent electronically. The notarios and Mexican closing agents involved in the closing process are all part of the electronic universe. Sounds simple, doesn’t it? Well, this is Mexico, a foreign country with a different set of laws regarding the buying and selling of real estate. But because the beginning of the process is so familiar, the reams of paperwork, the various government agencies involved, and the extended timeline (60-90 days) can sometimes frustrate the foreign borrower. One of the most noticeable differences is that closing costs are significantly higher than in the U.S. or Canada. Despite the differences, the involvement of banks in the process has established checks and balances that were not previously in place, making it safer to buy and finance real estate in Mexico. The real estate market in Ixtapa and all of Mexico’s resorts is booming, and there will be more lenders with new loan programs entering the market. Just as in the United States and Canada, mortgage brokers are the source of the loans and can help buyers decide on the best program for them. |
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