retirement home financing in mexico

How to Finance a Retirement Home in Mexico

Recently we did an article about foreigners buying property in Mexico. If you missed it you can check it out after reading this article.

We got a few follow-up questions from people wondering about ways they can finance their retirement property in Mexico. Asking questions about whether you can get a mortgage in Mexico and how does it work.

So that’s what I’m going to discuss in today’s article.

Okay so you found the property of your dreams here in Mexico and now you’re trying to figure out how to pay for it. I’m going to go through some different finance options pros and cons. Then you can decide which one’s best for you since it’s your property in Mexico.

Getting a home mortgage in Mexico

When getting a home mortgage through a Mexican bank one of the things they’re going to look at is your credit. While you may have a great credit score in the US, you don’t have any credit in Mexico.

This can be a problem for getting a mortgage in Mexico as they may ask for a credit score and since you don’t have one in Mexico then you won’t be able to get a mortgage.

But let say you go to the bank and they allow you to get a loan then that’s great! But you must know that mortgage rates in Mexico compared to the US are very different.

You will get interest rates from 9% up to around 12.5% which seems very high compared to back home.

So applying for a mortgage might not be a good option especially if you are borrowing a great amount to pay for your retirement home in Mexico.

Cross border Financing

Let’s move on to the next option which is cross-border finance. There are companies that specialize in helping Americans and Canadians buy property in Mexico by providing financing. Although they are similar to Mexican mortgages in that high compared to in US and Canada with interest rates of around 7% to 10%. Be sure to read the contract you sign with a cross-border financing company as you might have to borrow a certain amount and have a significant fee for prepayment.

So if you don’t mind paying a higher interest rate may be because you plan to pay it off fairly quickly then getting cross-border financing can be a good option.

Developer Financing

So let’s move on to developer financing your retirement home in Mexico. If you are planning on buying a home moving to a part of Mexico such as Playa del Carmen, Tulum, or other places in the Riviera Maya, which attracts a lot of expats like me, then you’ll inevitably find developers creating communities for us foreigners.

The developers realize that options for financing a home for Americans and foreigners is not the same as home. So they typically have some type of financing available.

Generally, they may ask for somewhere between 20 to 50 percent downpayment depending if it’s already an existing construction or if it’s pre-construction they offer rates. Usually between 7% to 10% percent typically.

Often you can pay 0% interest while the developer is constructing your home. This could mean that you pay 0% interest for anywhere from 6 months to 3 years when the development is finished. The terms of the loan are much shorter than what you’d expect from a mortgage. They range anywhere from 36 months up to 5 years or 10 years. this depends on the developer and if they offer to finance you.

If you are planning on paying off your retirement home early and in small consistent payments then using developer financing is a great option and is actually one of the most popular options for many Americans and Canadians.

Are you looking for a property you can finance for up to 25 years in Playa del Carmen Mexico as a foreigner? Click here to view Luna in Playa del Carmen. 50% of units sold out!

Finance a retirement home in Mexico from US

Another option is to get a loan in your home country. From a bank or lending service back home. As a personal loan or you do refinancing for a second mortgage on your house back there.

This is a great option as you’re still going to get a much better interest rate than you’re going to get using either cross-border financing, developer financing, or borrowing from a bank in Mexico.

Using IRA self-directed to Finance a retirement home in Mexico

Using Self-directed IRAs and use some of your investment money to buy a property in Mexico. If you have a self-directed ira you can invest in things other than stocks bonds. Alot of people don’t know that it’s been that way since 1974 this is not new.

it is possible to use ira funds to purchase a property in Mexico for investment purposes before you actually retire.

Though this option has a catch. IRS will not allow you to get direct benefit to anything that you’re actually investing in through this type of structure. You can’t even use it as a vacation home. It was set it up that way so people wouldn’t just take money out of their retirements to just live better. So if you plan on living and retiring very soon then using IRAs is probably not the best option.

Using cash to buy your retirement home in Mexico

Cash in any country is king when it comes to buying a home and Mexico is no different. If you have enough money saved up, then it’s a great option.

You can pay it off in cash installments. This works out great when you buy pre-construction. If you are buying a home that you want to move into immediately then paying in can mean getting ownership quickly too.

If not able to pay in cash upfront, you may have to choose one of the options mentioned above.

If you are thinking of buying a retirement home in Riviera Maya Mexico in places like Tulum, Playa del Carmen, and Puerto Aventuras then it’s best to get help from a real estate agent.

Our real estate agents have helped many Americans and Canadians find their retirement homes in Riviera Maya Mexico. If you would like personal help then click here to contact our real estate agents today at no obligation.

If you have enjoyed this article then you may also like reading this article: 7 Ways to Finance a home in Mexico. Which explains 2 more creative ways to finance your home in Mexico.

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