Guide to financing a home in Mexico (as a non-Mexican)
Are you looking to buy a property in Mexico as a Canadian? It’s important to know how you are going to finance your property in Mexico. Here is a quick guide for 7 financing options available in Mexico for you when buying your Mexico property.
Is it possible to finance buying a home in Mexico as a Canadian?
Whether you’re purchasing Mexico property as a second home or as a retirement home on the beachfront of the Riviera Maya, or a condo located in the heart of Playa del Carmen, or a vacation home in Tulum – it’s never been easier for residents of Canada (or other foreigners) to buy a vacation home in Riviera Maya Mexico.
While most homes are purchased in Mexico are using cash, there are other options for financing your Mexico property.
7 Ways to Finance a Home in Mexico as a Canadian
Are you planning to sell your current home to retire in Riviera Maya Mexico? Use the proceeds from the sale of your home to finance your new property in Mexico, or use some of the home’s equity.
An alternative option is to use your retirement savings.
1. Use Developer Financing
Many developments here in Riviera Maya Mexico do offer to finance. Working with a development company that offers their own financing plans, is a good option when available.
Most developers do not extend a mortgage to cover the entire cost (or a majority of the cost) of the project in advance.
Instead, they offer a partial mortgage after you have made a large down payment. This is usually is 30%, 50%, or more. It’s common for developers to require at least 50% of the down payment when you take ownership.
With the remainder paid off over an average period of between five and eight years. Most developers financing interest rate will be from 6% to 10%. However a period of time
So, if you don’t have access to the total down payment amount upfront, or if you have trouble borrowing the money from your bank back home, then developer financing may not be your best option for you.
Financing Options for Presale Real Estate in Mexico with a developer
Investors are buying presale because it’s cheaper than buying the fully constructed property. There’s no risk of a property bubble bursting before they can occupy the building or sell to someone else. And buying in presale gives you access to some attractive and flexible payment options.
If you’re more of a long-term investor, you’ll probably be less concerned about the time frame delivery of presale units and more about the overall ROI.
What’s the developer payment for presale?
There are a number of different developers offering different financing payment options. Below are the normal payment options.
Developer payment options in presale:
- 30% Down payment – 40% in payments during construction and 30% upon delivery.
- 50% Down payment – 30% in payments during construction and 20% upon delivery.
- 80% Down payment – 20% upon delivery.
Typically, if you invest 50% or more in a project, the developer will offer you a discounted price. Our real estate agents help you negotiate in buying your presale property. Click here to contact us today.
How many years of finance do developers offer in Mexico?
This can vary depending on the development and the developer. Some developments in presale will allow you to pay-off the property in deposits as stated above. This can be anywhere from 3 months to 18 months or more. With Full payment must be completed upon the completion of your property.
However some developers can offer 5 to 10 years in finance. And if it’s a rental property – allow the rental income from your property to pay for itself over time.
2. Finance in the US or Canada with USD
Some individuals have used this method to purchase real estate in Mexico.
- Cash out refinance against your current mortgage.
- Home Equity Loan: If you own a property, then typically you have some amount of equity, and can use that equity to get a loan for another property. You’ll get a loan with a fixed rate of interest of around 6%.
- Home Equity Line of Credit: A home equity line of credit (HELOC) is in many ways similar to a home equity loan, but it is a much more flexible option.
- Personal loans offer lower interest rates than credit cards, but it will most likely be higher than a mortgage.
Additional charges may apply depending on certain factors.
3. Finance Your Mexico Property with Pesos Using a Mexican Banks
The good news is you don’t have to be a Mexican resident to get a loan from a Mexican bank. Mortgages in Mexico tend to be not as competitive as those in Canada.
It is possible to get a Mexican mortgage as a non-Mexican.
However, like Canada, Mexican banks have standard requirements.
Mexico Common Loan Requirements:
1) Exceed a minimum credit score.
2) Have property damage insurance.
3) Copies of tax returns.
4) Proof of income.
5) Bank references.
6) Migrant visa (FM2) or non-migrant visa (FM3).
7) Age requirement of 18 and no older than 70.
Documents related to the property:
8) Sales contract.
9) Proof of down payment.
10) Copy of the deeds.
11) Copy of architectural plans.
And all the other normal requirements involved in any real estate transactions.
Mexico banks expect you to have a migrant visa (an FM2 visa) or in some cases, a non-migrant visa (an FM3 visa).
Using a Mexican bank comes with conditions based on the type of Mexico real estate you’re interested in buying.
Banks in Mexico only finance the sale of real estate that is already titled (an existing home). And Mexico banks do not offer a mortgage on new property or pre-built construction projects.
Mexican banks only offer foreign buyers a mortgage amount worth 50% of the existing home’s value. Not the typical 80 to 90% of a home’s value like US or Canada.
Banks in Mexico require that you get life insurance that covers the loan amount.
If you earn in Canadian Dollars, then borrowing in pesos can be an attractive option, especially if you expect the peso to depreciate a condition that would result in an overall lower payment over the long term.
4. Financing with your 401K/RRSP using a self-directed IRA with Canadian Dollars
If you have a 401K/RRSP and want to invest in a property (or other foreign investments) without having to pay taxes, you might consider financing with such an account using a self-directed IRA.
As a senior citizen, you can tap into your retirement savings account and decide where to invest it.
5. Cross border loans let foreign buyers finance real estate in Mexico
As the name implies, these companies help people with foreign credit cards, banks, and bank accounts to purchase property in Mexico.
There are several options for cross-border investments to finance properties in Mexico. Do your homework and ask a lot of questions when researching the different financial institutions.
6. Finance together with family and friends
One of the emerging common ways to finance a property in Mexico is split financing the property. This can be with a friend, a family member, or any other kind of partner.
Investing together is often easier and quicker than by yourself.
7. Finance with Cryptocurrency
An emerging way to finance the buying of your property in Mexico is using cryptocurrencies. Turning something intangible into a tangible investment is not only smart it makes sense.
Some investors choose to finance full or small parts using cryptocurrencies. Using cryptocurrency to diversify your investment portfolio in real estate should be a goal.
Find Your Mexico Property Today with Caribe Luxury Homes Mexico
When it comes to buying Mexican real estate, it’s much easier in cash. Developer financing is available and requires a large down payments. Using Mexican banks can be a challenge, as it requires a great deal of paperwork and patience.
Do you have all your finances in order and you are ready to go?
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