How do mortgages in Mexico work? Let Me Share!
If you’re wondering, “Can I get a mortgage in Mexico as a US or Canadian citizen?” the answer is yes!
Hey there! I'm Alex Caron, founder of Bellenty Real Estate, and this is an special series about investing in Beach Real Estate in Mexico.
As an expert realtor with years of experience helping expats and investors find their dream homes in Tulum's paradise in the Riviera Maya, I'm here to guide you and share my experiences to help you navigate the financial aspects of buying property in the Beach Real Estate for sale in Mexico.
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Let’s dive into the Brief overview of the mortgage landscape in Mexico and explore the Importance of understanding the process for expats.
First up...
Why Consider Financing Property in Mexico?
Mexico is one of the best destinations for vacation homes, with beach houses selling for a fraction of the price of homes in southern California, Florida, Arizona, Texas and Hawaii, you can afford to get a bigger, or better quality home within your budget.
Imagine owning a luxurious beachfront property in Tulum for much less than a comparable home in the US – it’s a dream come true for many!
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Photos from Bellenty Villas in Tulum
10 exclusive beach homes in 2 levels - PRE-SALE.
Financing property in Mexico is a smart move for several reasons.
First, the real estate market here is booming, especially in popular areas like Tulum. According to recent trends, property values in Tulum have been steadily increasing, making it a promising investment opportunity.
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Related: [ How Much is a Beach House Cost in Mexico - $100,000 usd? ]
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According to recent reports, Tulum has seen a 10-15% annual increase in property values, plus, with the growing demand for vacation rentals, you can generate a substantial income if you choose to rent out your property.
So, whether you’re looking for a vacation home, a retirement haven, or a lucrative investment, financing property in Mexico is an option well worth considering.
Can I get a loan to buy a house in Mexico?
Absolutely, you can get a loan to buy a house in Mexico!
These loans come with competitive interest rates, making it easier than ever to finance your dream property in Mexico.
From my experience, the majority of Expats buyers who purchase a home in Mexico tend to use cash. This is mainly because financing options for international buyers are limited and often less favorable than those available in your home country.
However, if you’re not in a position to pay entirely in cash, there are some financing options worth considering.
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Check this article: [ Why Tulum Beachfront Living is Ideal for Expats and Investors ]
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Financing options for US citizens living in Mexico
Historically, securing a mortgage in Mexico as a non-citizen has been challenging, but things are changing.
Intercam Bank’s Dream Loan is making it easier for US and Canadian citizens to buy their dream home in Mexico's most desirable locations, including Puerto Vallarta for Sale, Cabo, and the Riviera Maya (Cancun and Playa del Carmen).
Whether you're eyeing a stunning villa in Tulum or a luxury condo in Playa del Carmen, this loan can make it happen.
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Dream Loans require a minimum home purchase price of $250,000 USD with competitive interest rates ranging from 7-9%, which is quite reasonable for Mexico.
Keep in mind that mortgage rates in Mexico are typically higher than in the US.
There are three lenders that many have had positive experiences with when using US credit history:
- MoxiGlobal
- Mexlend
- Yave
These lenders offer various types of loans to suit different needs:
LTV Loans (Loan-to-Value): These require around 30% down and typically have minimum loan sizes of about 6 million MXN. They are serviced in USD, which can be advantageous for those with US-based finances.
BBVA / Yave Traditional Mortgages: These are amortized mortgages requiring 10-20% down, with terms of 10-20 years. However, they are serviced in Pesos, which introduces currency risk if your savings or income are in USD or Euros. For smaller home purchases, this risk might be minimal.
When it comes to loan terms, Yave stands out as a better option compared to TuCasaExpress or HIRcasa, since those aren't technically loans. It's important to note that balloon payments are not a feature of Mexican mortgages.
To check the loan terms, you can visit the CONDUSEF (the Mexican equivalent of the US's Consumer Financial Protection Bureau) website. Specifically, for Yave, you can review the terms here.
Most contracts overseen by CONDUSEF are publicly available on their website.
When reviewing the contract, look for the terms "FIJA" (fixed rate) and "Crédito Simple" (simple non-revolving loan). This means that your rate remains fixed regardless of external economic factors, as long as you stay current on your payments.
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Using this information, you can confidently explore mortgage options and find the best fit for financing your dream home in Mexico!
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Here’s a tip from me: If you have significant equity in your US home, you might want to consider using it to free up cash for that vacation home in Tulum you’ve been dreaming about. This can be a smart move to make your Mexican real estate dream a reality without stretching your finances too thin.
This strategy has worked wonders for many expats and investors I've worked with, allowing them to buy a beautiful beachfront property without draining their savings.
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Alex, What pieces of information are needed for a mortgage application?
Let’s break down the required documentation for mortgage applications in Mexico.
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Required Documentation for Mortgage Applications
When applying for a mortgage in Mexico, having your paperwork in order is crucial. Here’s a comprehensive list of documents you’ll need:
- Valid Passport: Make sure your passport is current and has at least six months of validity left.
- Proof of Income:
- US Citizens: Recent pay stubs, W-2 forms, and bank statements.
- Canadian Citizens: T4 slips, recent pay stubs, and bank statements.
- Credit Report: A recent credit report from a recognized credit bureau. This is essential to demonstrate your creditworthiness.
- Tax Returns: Your last two years of US or Canadian tax returns. These documents help verify your income and financial stability.
- Proof of Address: Utility bills, bank statements, or lease agreements showing your current address.
- Employment Letter: A letter from your employer stating your position, salary, and length of employment. This document is crucial to verify your income stability.
- Bank Statements: The last three to six months of bank statements. These should show your savings, investments, and any other assets.
- Property Documents: If you’re purchasing a property, you’ll need the purchase agreement, property title, and any previous ownership documents.
Tips for Preparing Your Application
Organize Your Documents: Keep all your documents organized and easily accessible. A neat and complete application can speed up the approval process.
Get Pre-Approved: Before you start house hunting, get pre-approved for a mortgage. This shows sellers that you’re a serious buyer and can give you an edge in competitive markets.
Consult with Experts: Team up with Bellenty Real Estate or a real estate agent and a mortgage broker, who know their way around working with foreign buyers. They’ll be your guides through the whole process and can help you dodge any common pitfalls. Trust me, their expertise is invaluable.
Understand the Currency Exchange: Be mindful of the currency exchange rates because they can affect your mortgage payments. For example, setting up a dollar account can help mitigate any currency risk. It’s a smart move to keep things stable.
Review Loan Terms Carefully: Make sure you’re crystal clear on the terms of your mortgage. That means knowing the interest rate, repayment schedule, and any extra fees. Remember, look out for terms like “FIJA” (fixed rate) and “Crédito Simple” (simple non-revolving loan) to ensure you have a stable deal.
Check Your Credit Score: Before applying, check your credit score and take steps to improve it if necessary. A higher score can help you secure a better interest rate.
Prepare for Additional Costs: Lastly, don’t forget about the extra costs beyond your down payment. For example, you’ll need to budget for closing costs, legal fees, and other expenses. Having a buffer to cover these costs is a good idea so there are no surprises down the line.
By gathering all the necessary documents and following these tips, you’ll be well on your way to securing a mortgage and owning your dream home in Mexico.
Now, what if you’re a Mexican citizen? How do you go about getting a mortgage?
Mexican banks typically offer loans with loan-to-value ratios of 50-70%, meaning they cover 50-70% of the home’s value. In some economic conditions, financing can go as high as 90%. To apply for a loan from a Mexican bank, you generally need to be a resident of Mexico.
Here’s a checklist of what you’ll need:
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- An up-to-date RFC tax number (similar to a social security number in the US)
- A CURP (unique population registration code for all citizens and residents)
- A credit report from a credit bureau (buró de crédito)
- A recent medical certificate confirming good health
- INE (Mexican official ID) or a passport
- A monthly electric bill or phone bill that confirm that you are indeed a resident
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Mexican banks are thorough in their investigation of potential borrowers, ensuring that all criteria are met before granting a loan.
Whether you opt for a mortgage or not, remember that there are several additional fees and costs associated with real estate transactions in Mexico. It’s essential to factor these into your budget when planning to purchase your new Mexican Beach Home.
Regardless of the type of home you’re seeking, there are various mortgage options available to help you secure your piece of paradise in Mexico.
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This 7 Top Beachfront Areas in Tulum offers a unique blend of tranquility, beauty, and sustainability, making it one of the best places to buy beachfront property in Mexico.
Check this article: [ Exploring Top Beachfront Areas in Tulum: A Local’s Guide ]
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