It is always difficult for US Citizens and Canadians to think of themselves as foreigners, even when they are in another country! But, if you are buying in Mexico and you are not Mexican, you are a foreigner… and Mexico welcomes all who wish to partake in the incredible lifestyle and investment possibilities that are now abundant throughout the country.
If you do not have 100% of the cash to make this happen, it does not matter, because there are financing options available. In fact, there have been mortgage options for foreigners since 2003, when a few smaller US banks began pilot programs to fill this niche.
The years between 2003 and 2014 saw U.S. banking institutions reaping the benefits of high-quality loans in Mexico. The interest rates during those years ranged between 6.5% to 10%, depending on the year, and the lender. While these rates might seem a little high to the average foreign buyer, they were always in line or lower than their Mexican bank interest rates counterparts.
The march of the ensuing chaos of the Economic Crisis took its toll on these institutions, and despite the Mexican portfolio offering their investors a good profit. Some of these lenders, like GE Capital or GMAC, simply went out of business because of their sub-prime activities in the United States and other countries.
Others, like Laredo National Bank, were swallowed up by huge multi-national institutions, who deemed the niche market of foreign residential loans in Mexico too small, and too much trouble to continue. While they made sense for a small regional bank like Laredo National, they were a bother to Compass BBVA, who could do a medium sized commercial loan with a tenth of the staff and legal work.
But not all is doom and gloom. Brokers like MEXLend Mortgages for Mexico have diligently sought alternative mortgage sources through private funds and private individuals to continue to offer clients reliable mortgage help. There are Mexican Peso mortgages available for foreigners and there are USD loans available as well.
The costs of these loans will always be higher than what is available in the USA or Canada, however, they work for many, many investors. Those of you who are a bit older will remember rates in Canada of 14% and rates in the USA in the 12% range. Even at those higher rates, people bought homes and realized great appreciation and profits. Down payments range from 30% to 40%. Down payments are higher because you are a foreigner buying what is typically either an investment property or vacation home, and these loans have carried a historical higher risk for lenders.
Today, the Mexican Peso loan is a bit complicated, but it offers the best effective rates available in the market. The USD loans have a higher interest rate, however, they make excellent bridge loans if a client is planning on selling a property in the future, or waiting to cash in retirement funds to avoid a penalty.
While a home equity line of credit from a home in the USA or Canada may still offer better rates, having a loan directly on the property here in Mexico, makes sense for many clients. Just one of the benefits of a loan in Mexico is that it will not show up on credit reports in the USA or Canada. This leaves you open for more options in your home country should an emergency arise.
Loans are available for the purchase of condominiums, homes and lots. They are also available for lot purchase and home construction, and there are even cash out refinancing options available for foreigner buyers.
Terence L. Reilly is the CEO and a Founder of MEXLend Mortgage, Escrow and Insurance, with over 14 years of hundreds of successful loan closings. The oldest brokerage and a national company, MEXLend has had offices and representatives throughout Mexico and continues to provide their award-winning services in the entire country.
Are you looking to purchase vacation or investment property in Mexico? Click here to discover which one of the mortgage loan options that MEXLend offers is right for you.
