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.
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%.
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.
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.