Financing Options When Buying Property in Mexico

Riviera Maya (Source: Q-Roo Paul)

Readers from the United States and Canada are often disappointed to learn that they can’t come to down to the Riviera Maya in Mexico and get a 15 or 20 year mortgage. Well, that’s not exactly true – they can, but they really shouldn’t. I’ll talk more about that one later.

For the most part, Mexico’s real estate market is a cash market. You see something you like, make an offer, and then pay the entire balance due. This is especially true when buying a home from a private party.

For those of you who don’t have an extra $150,000 just lying around, there is hope in the form of real estate developers.

Developer Financing

Real estate developers, especially those catering to foreign clients, generally offer a few financing options to potential clients. All of the financing is done by the developer, so you don’t have to worry about bank approval.

Most of the financing options will require 20% – 50% down, with the balance to be paid within 3-5 years. Interest rates will vary, so pay close attention to those if you select this option. Most rates fall somewhere between 7% – 10%.

Preconstruction Options

If you’re on a tight budget and you don’t need to move into a place in Mexico right away, you might want to consider buying something preconstruction. You can save about 20% off the price of a finished unit and it’s generally easier to get developer financing.

Even with this option, you’ll still need to have capital to put down to make it work. Here’s a preconstruction payment plan taken from an unnamed development in the Riviera Maya:

* 30% down payment at the time of the contract

* 20% due at the time of delivery 

* Financing starts after delivery

* 50% of the value financed over 36 months at 8% interest

Mexican Bank Mortgages

It is possible to get a longer term mortgage (10 years or more) at a Mexican bank, but the interest rates are very high – averaging around 10% or more. When you throw in additional bank fees, this becomes a very expensive option.

The Mexican government has a free site that allows you to compare the mortgage rates offered by multiple financial institutions. All you have to do is enter the value of the property (in pesos), the amount of the down payment (also in pesos) and the duration of the loan. The site provides you with the results instantly.

The site is entirely in Spanish, however, most non-Spanish speakers should be able to operate it after looking up a few words online.

https://phpapps.condusef.gob.mx/condusefhipotecario/datos.php

Screenshot of CONDUSEF site comparing bank rates for a 10 year mortgage on a property valued at $2,700,000 MXN with a $530,000 MXN down payment. For example purposes only. 

It’s important to note that Mexico has a completely different credit bureau, so if you haven’t been here long, you don’t have any credit at all. That can make it very difficult to get a loan from a Mexican financial institution.

Let’s Wrap This Up

Buying property in Mexico requires quite a bit of capital. Since our goal was to live debt free in paradise, we decided to liquidate all of our assets in the U.S. (e.g. house, cars etc.) and use the money to buy a condo outright in Mexico.

It’s so much easier to live large on a small budget when you eliminate the big reoccurring expenses, such as mortgages and car payments.

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About the Author

Q-Roo Paul
Paul Kurtzweil (Q-Roo Paul) is a former lieutenant from the Polk County Sheriff's Office in Florida. During his 25-year career, he received numerous commendations to include two of the agency's top honors: a Meritorious Service Medal and a Medal of Valor. In 2015, Paul retired and moved to Mexico with his wife. He now spends his days enjoying the Riviera Maya and blogging from the beach.

21 Comments on "Financing Options When Buying Property in Mexico"

  1. Your a wealth of information. Thank you.

  2. Ms Suzanne Nye | June 25, 2017 at 8:20 am | Reply

    I took out a mortgage on my US home and used the $ to buy my home in Merida, Yucatan. That worked out great. It gave me the capital to pay cash at a low interest rate. The interest is also tax deductible on US income tax. I could leave my investments making money for me.

  3. Beware of pre-construction ripoffs. You may lose your 30%

  4. Another option is to buy the lot and custom build your house at your own pace. I did this and worked out rather well. I am an engineer with strong background in concrete structures so that helped, but there are plenty of qualified Mexican professionals for hire rather inexpensively. Custom building has many advantages. You can set the design to your needs and control the quality of materials and labor not to mention cost. However, lots of patience is required and shoud only be done if you don’t have a set move in date. Here is a link to my construction progress blog. http://buildingahomeinyucatan.blogspot.com/?m=1

  5. Craig Roberts | June 25, 2017 at 9:24 am | Reply

    What are the propery values for homes and condos in the area you’re in Paul ?

    • They vary quite a bit depending whether or not your in a gated community, amenities etc. A 2BR condo can be $150,000 and up. For residences, penthouses etc, $250,000+.

  6. Paul, Thank you for this information.

  7. Glory Jordan | June 25, 2017 at 9:56 am | Reply

    Very informative

  8. Laura Wiig Hoffman | June 25, 2017 at 12:17 pm | Reply

    Hi Paul, Can you provide insight on what upper middle class mexicans options are for housing? The cost you mentioned about a gated 2 bdrm condo seem more American than Mexican. Is this more related to mostly solidly expat communities? Or maybe I am off base in thinking $150K us dollars is out of middle class mexican reach especially since it is a cash market.

    • The prices that I gave are for the condos and residences located in gated resort communities. The majority of the owners are foreigners. The Mexican owners tend to be from Mexico City and they only use their places here as vacation homes.

      As far as other housing options geared more toward locals. You can find developments with small residences/apartments starting around $45,0oo USD.

  9. Very good info; and just a comment about loans/mortgages from a MX bank. Like in the USA or Canada, banks want a credit history. The credit history of foreigners has not been accepted/considered in underwriting by MX banks – they want a history of credit credibility IN MEXICO. For a few months 2007-2008, US banks were prepared to accept MX property as collateral for US-based lending. That soon ended in the “Great Recession.” If anyone knows of a lendor in MX that will accept the credit history of a USA or Canadian citizen, I’d love to know. OR, maybe we are already growing fast enough ! I’ve been a realtor based in Playa del Carmen for almost 15 years…

  10. Thanks Paul.

  11. I am passing on this info as we were just involved in with regards to making a Wire Transfer for purchasing a lot. The contract sent to us was both in Spanish and the developers version in English. We spent much time with the sales rep in Playa De Carmen and all fees were always referred to in Pesos. Along with the Wells Fargo bank rep, we all understood it to be transferred in Pesos. The wire transfer was sent back to our bank mainly because of the “Frank Dodd Act”. This first mistake we made has a penalty of $3000.00 USD and an investigation to follow. We have to return to our bank tomorrow to work through the process again to transfer a second time and wire it in U.S Dollars.

    • So, sorry to hear that happened. That $3000 fine is the bank’s responsibility, not yours. The Frank-Dodd Act was designed to protect consumer’s rights. Violations generally involve failure to disclose certain information to you, such as:

      *The exchange rate.
      *Fees and taxes collected by the company.
      *Fees charged by the company’s agents abroad and certain other institutions involved in the transfer process.
      *The amount of money expected to be delivered, not including foreign taxes or certain fees charged to the recipient.
      *If appropriate, a statement that additional foreign taxes and fees may be deducted from the remittance transfer.

      I’ve never heard of a requirement that wouldn’t allow you to send a wire transfer in pesos, provided that the financial institution complies with the disclosure requirements. You have me very curious now 🙂

    • If you’re buying property and need to transfer money to Mexico, I highly recommend using TransferWise or OFX (used to be US Forex). We initially went to our local bank to do this but besides tedious and slow, the rate transfer was crazy, we were losing about 10% of our funds through poor currency spreads and fees. Also be sure to get the price in dollars or pesos set, some companies tend to change the value as the peso fluctuates to benefit themselves.

  12. Hi Paul & Linda, We bought a pre-construction condo that will be ready in March directly from a very well established developer. We put down a deposit on a credit card with a 3 week cancellation clause. When we got back to the states, we took out a home equity line of credit, interest only (tax deductible) for 10 years and have been making monthly payments on the condo. When we sell our house this summer we will be able to pay off the home equity and balance of the condo. This might be an option for those who want to secure a property using your home equity, giving you time to sell your house, rather than renting down here and looking. We’ve been coming here for over 30 years so are familiar with the area.

  13. Thank you so much for all of the information you post. Downloaded the book, that you suggested, regarding health care in Mexico which is awesome! Thinking of trying to move to your area soon so the info you are providing is much appreciated. I’m only 53 so a little scary contemplating quitting and moving and just living life 🙂 However, we are very close, I think, to heading south. Thanks Paul!!!

  14. Stephen Slater | June 26, 2017 at 12:22 pm | Reply

    As for pricing throughout Mexico, if you go into luxury housing and penthouses, the high end goes way past what is discussed above. You can pass $1million usd very quickly in the premier markets. The true range of options is that significant.

    Also, when buying, don’t rule out Seller Financing. If you put down a 25% deposit, pay 50% at delivery/occupancy, depending on how good of a negotiator you are, you can get the last 25% carried by the seller. Short term (12 months) without interest, or longer term with modest interest carry.

    Don’t forget, any property along the coast requires a trust, through a bank. You do not technically hold title. Not to be concerned however, as the process is safe. In the interior of the country you can own in fee simple estate form, as in the US.

    Also, understand pesos and dollars relative to the exchange rate and implications when/if you sell. Most people think of it in small numbers and in one direction. Now is a good time to buy in pesos, if your income is in dollars. While many of you may not be sellers, one day you might be, and the current environment is an example of a poor time to be selling in pesos and converting to dollars. Again, the process goes both ways.

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