Everything you need to know about financing your new home in Mexico.
I'm just going to drop this right here - Mexico is mainly a cash market.
Financing is very scarce and to be honest it really complicates things and puts your deal at risk of falling through just because of the complexity it adds.
If you're hell bent on financing your property in Mexico I will include a few options below but with the exception of presales and developer financing I always encourage my clients to secure their funds back home before beginning a property search. The cost of borrowing even with recent rate hikes will be lower than doing it here.
Finance Options
(In order of recommendation)
1. Presale
Presale projects do offer various payment plans but in most cases must be paid in full by the time the unit is delivered. These are great options if you're looking for 12-24 months to pay. If you bring a larger down payment (usually over 30%) that gives us leverage to negotiate a discount. This is easier to do in the earlier stages of commercialization of a project. Closer to completion there is less opportunity to get a bargain. Presales also offer the best opportunity for gains when you buy in early at investor pricing.
2. Developer Financing
If a client is seeking a purchase with post-delivery financing I always direct them to developers who offer in-house plans. This is the safest, easiest way to stretch your payments over a longer period. The problem with this option is that it's rare to find a developer big enough and established enough to offer this. So that limits you to a handful of projects with little flexibility in price.
3. Owner Financing
This is sometimes a short term option for financing your resale home in Mexico. If a seller is in a position to offer some sort of financing, it will likely be no more than 2-5 years. Probably on the lower end of that. It's something to keep in mind when considering which types of properties you want to short list.
4. Mexican Bank Loan
This is lower on my list as the cost of borrowing doesn't make a lot of sense. Not many Mexican banks will lend to foreigners without seeing regular deposits in their account for several months. With that said, I am aware of a few select banks and 3rd party lenders (mentioned below) who offer traditional mortgage products to foreign buyers but again, this is not the most cost effective way to fund your home here.
5. Third Party Finance Companies
This option is last on my list for good reason. Rates are quite high and as with any traditional mortgages product, appraisals and insurance will be required, adding even more to your closing costs and timeline.
Here is a summary of the best option I'm aware of in this arena:
I have a U.S. based fintech company who offers digital mortgages to foreign buyers in Mexico. The current rate is 10.99% and they will go up to 85% LTV for 20 years. You can have a co-applicant. There are no prepayment penalties on their loans. The minimum loan amount is $30,000 USD with a minimum property value of $50,000 USD. The fideicomiso is done with the loan as the lender will be a leinholder. Regimen de condominio is not required but construction must be at 80% completion before funding is released. Minimum requirements for this lending product is a FICO score of 680 or higher and a debt ratio of 55% along with 18 of the previous 24 months employed.
This all sounds wonderful but when you add all of the loan setup fees, appraisals etc. you are looking at increased closing costs as mentioned previously. Only you can determine whether this is worthwhile in your situation. If you're an investor looking for maximum ROI, then probably this isn't a good option for you. If you're looking for a new home for your family to enjoy then the extra cost of borrowing might be worth it for you.
It's always best to discuss your funding needs with your agent. If you have a mortgage broker back home I would recommend you make an appointment with them to discuss options like a home equity loan or line of credit. That is going to be the most cost effective way to fund your real estate purchase in paradise.