A Look at Financing Options for Foreigners Buying Property in Mexico

We often get questions from our readers, primarily those from the U.S. or Canada, asking us about financing options when buying property in Mexico. 

For the most part, Mexico’s real estate market is a cash market. You see something you like, you make an offer, and then you 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 USD or so just lying around, there are other options. I’ll go through some of the most popular ones.

Home Mortgage Through a Mexican Bank

Let’s start with the way that most folks typically finance a property back home — a mortgage through a bank.

Since it’s highly unlikely that your bank back home will allow you to obtain a mortgage on a foreign property, that leaves applying at a bank in Mexico. Unfortunately, there are two problems with that option:

1) Mexico has it’s own credit bureau (Buró de Crédito) and unless you’ve lived in Mexico for a decent length of time, you have zero credit; and

2) the interest rates are terrible!

The Mexican government has a free site from CONDUSEF 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 will provide you with the results instantly.

Here is the URL: https://phpapps.condusef.gob.mx/condusefhipotecario/datos.php

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

Example Time!

In the graphic below, I used the CONDUSEF site to compare bank rates for a 15 year mortgage on a property valued at $3,000,000 MXN with a $500,000 MXN down payment.

“Pago Total” is the total amount you will have paid for your $3,000,000 property at the end of the 15-year term.

“Tasa de Interés” is the initial interest rate on the loan. As you can see, the rates are quite high.

“CAT (Costo Anual Total)” is a a measure of the total financing cost you can expect to pay. This number includes all of the interest, administrative fees and related costs. It allows consumers to better compare lending rates.

* Data collected 09/25/20

Personal Loan Through Your Home Bank

Even though your bank most likely won’t give you a mortgage on a foreign property, that doesn’t mean that you can’t get a personal loan to cover the costs.

Other than just paying cash, this is probably the second most popular financing for foreigners buying property in Mexico.

Cross-Border Finance Companies

There are companies that specialize in offering mortgages to Americans and Canadians who want to purchase property in Mexico. You can find several by doing a Google search for “cross border mortgages Mexico”.

This is a popular option for many future expats because these companies offer terms that closely mirror traditional mortgages in the U.S. and Canada.

There are a few things to keep in mind when using one of these services:

  1. There is normally a minimum loan amount somewhere in the neighborhood of $100,000 – $150,000 USD.
  2. The loans may be exclusively for citizens or resident card holders of the U.S. and/or Canada. Be sure to read the requirements carefully.
  3. The interest rates are typically higher than those offered in back home.
  4. There is often a significant prepayment penalty written into the contract.
  5. If you are buying the restricted zone, some lenders will not give you a loan if you choose to structure it under a Mexican Corporation as opposed to a bank trust known as a fideicomiso.

My advice for anyone thinking of going this route is to shop around and compare the rates and conditions of multiple lenders. This may save you a lot of money and headaches in the long run.

Developer Financing

Real estate developers, especially those catering to foreign clients, generally offer a few financing options to potential clients.

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 from a developer preconstruction. You can save about 20% off the price of a finished unit and it’s generally easier to get developer financing.

If you do choose to buy a unit preconstruction, 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

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

Qroo Paul
Paul Kurtzweil (Q-Roo Paul) was a deputy sheriff in Florida for 25 years before retiring at the rank of lieutenant in 2015. He and his wife moved to Mexico looking to maximize their retirement income. They later started a blog called Two Expats Mexico (qroo.us) to share their experiences as well as information about the logistical and legal aspects of retiring south of the border.

21 Comments on "A Look at Financing Options for Foreigners Buying Property in Mexico"

  1. Great article. We bought our home 20 years ago, with cash. The one area you did not add into the purchase costs are the initial cost and annual Trust fees. Another item to shop around for. Our annual fee is about half of what other homeowners in our development pay, thanks to the builder we bought our home from.

  2. Good advice. Eliminate debt and be comfortable on small cost of living!

  3. If you apply for a loan back home, tell the bank it’s for home improvements or other purposes, not to buy a property in Mexico.

  4. I bought land in the Mexican countryside with a creek running through it for less than US$2,500 per acre and built a small one bedroom house by hand for about US$15,000.
    I live like a king on my monthly retirement money and do not have any bills except electricity, water, and Internet connection (about $50 per month for all). I am so happy I left the USA and I never want to go back.

  5. I checked on a cross border investment company offering a 3.8% interest rate, hahaha. The base rate was actually 10% and when all of the ridiculous fees were added including 3% monthly payment increases every six months over fifteen years, the overall interest rate was 21%!!!

  6. The easiest solution if money is tight is to do a cash-out refinance on your US home and use the equity to buy the Mexican home. You US payments will be higher, but at a very low interest rate compared to Mexico.

    Make sure that a bank escrows your down-payment. If the seller gets it immediately, which is how it’s normally done, you may lose everything if the deal collapses and the possibly unlicensed “real estate agent” or seller will not return the 10-20% down payment.

    If that happens, expect to wait years for the Mexican justice systems to grind to a conclusion, and assuming that the thief still haves it. They won’t.

    Buyer beware.

  7. Maria Cavendish | September 25, 2020 at 11:16 am |

    Is there a tiny house movement in Mexico yet?

  8. Sheila Lynn Dew | September 25, 2020 at 11:21 am |

    What about using self directed iras very easy option for Americans

    • That is an option that I will discuss in a separate post because there are several limitations and requirements.

  9. Mario Hernandez | September 25, 2020 at 11:37 am |

    Great information, thank you!

  10. I’ve heard that you don’t really own property when you buy it in Mexico. You are actually buying a 99 year “lease”, or something like that. Is that actually true? If so, what happens with the property when your “Lease” is up? Thanks.

    • It’s not a lease but that is a common misconception that you’ll see online.

      What you’re referring to is a restriction on foreigners holding direct title to property within the restricted zone, which is within 50 kilometers of any coast or 100 kilometers of any border. There are fewer restrictions on foreign ownership outside of that area.

      My condo is only a few minutes from the beach, so it clearly falls within the restricted zone. Nevertheless, I was able to acquire ownership of the property by establishing a bank trust, called a fideicomiso in Spanish.

      Basically, it works like this: The bank holds a naked title for the property and serves as the trustee for the property. The buyer of the property is named as the beneficiary of the trust and enjoys full ownership rights. That means that they can occupy it, rent it out, borrow money against it, make improvements to it, leave it to someone in their will or do anything else that can typically be done with real estate. So, I have the same rights to the property that I would have in the States.

      Just to be clear, the bank does not own the property. The naked title means that it is a title without benefits. The bank cannot sell, depreciate, lease or exercise any control over the property. In fact, the bank is not even permitted to list the property as an asset for accounting purposes.

      The trust is valid for a maximum of 50 years (Artículo 13, Ley de Inversión Extranjera), but it can be renewed indefinitely. The cost to maintain the trust averages around $500 USD a year. This fee is charged by the bank for providing the service.

      Another option for foreigners is to create a Mexican corporation and then buy the property under that.

      The legal basis and specific conditions for these two options are found in Mexico’s Foreign Investment Law (Ley de Inversión Extranjera). Under Article 10 of the law, a Mexican corporation can only be used to purchase properties for non-residential purposes.

      Since our condo is our primary residence and it was purchased for that purpose, that only left us the fideicomiso option.

      • I did a cash out option on my home. Rates are <3% currently. I negotiated in pesos and saved even more $ on the exchange rate. Best thing now since the exchange rate is at a all time high. One thing you didn't mention Paul is after 5 years of ownership you can apply to be naturalized citizen and the trust is no longer needed or if you have family. IE, get married etc. I just receive my Cancun driver's license last month and I'm thrilled. My home is by Aldea Zama. VIVA LA MEXICO

  11. We did the developer financing option and it worked out well somewhat unexpectedly. When we were buying, we were really wary of fluctuations in the peso, at the time it was like 13 to 1 and we asked the developer if we could lock in the finance portion in dollars. They said no, had to be in pesos. Well luck would have it when the financing portion came the rate was between 18/20 to 1… we saved around 35% of the cost from this alone.

    But go with a reputable construction company for sure, you could end up with nothing otherwise.

  12. We recently moved to Playa del Carmen and have found renting to have advantages for us currently. With the pandemic, rent prices have been reduced and the weak peso has also been to our benefit. We got into a location we never thought was within our budget. Depending on one’s situation, it may be better to invest a large sum and use the investment proceeds to pay rent. However, there is something to be said for the lower monthly expenses that come with outright ownership. If mortgage rates were the same here as in U.S. it would make it and easy decision to buy.

    We are enjoying our life in Mexico greatly so far. Thanks for all the awesome information on this blog. It has all been so helpful and very accurate.

    • I’m glad to hear that things are going well for you in PDC. Thanks for the positive feedback about the blog. It’s been a fun hobby these past few years.

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