Can a foreigner own real estate in Mexico?
I’ve heard the Mexican government can seize your property. Can I safeguard myself against this?
What makes today’s loans more desirable?
How is the mortgage loan secured?
Is the interest paid on the loan tax-deductible?
What is the minimum and maximum available loan amounts?
How important is the mortgage broker in the transaction?
How does Finance North America go about qualifying a buyer?
Can a foreigner own real estate in Mexico?
Yes! The myth that only Mexicans can own real estate in Mexico is... well, a myth. Foreign buyers can own real estate in what is called the “restricted zone” along the coastline, by obtaining all ownership rights through the aforementioned Fidecomiso or bank trust. This bank trust, established by the government, gives foreigners the same rights of ownership as Mexican citizens, with the only difference being that the actual title is held in trust for them by a trustee (usually a bank).
I’ve heard the Mexican government can seize your property. Can I safeguard myself against this?
Regularly, we hear about injustices done to foreign buyers in Mexico. The truth is, in these cases developers and / or buyers do not have a proper title to the land. Often times, to avoid closing costs, or simply out of ignorance, a buyer has paid for the property and taken possession of it but never obtained a registered title. It is imperative to always obtain a registered title for your real estate purchase. Always insist on receiving a registered title, just like you would in the US. You can also purchase title insurance. Title insurance is available for property in Mexico through companies like First American and Stewart.
What makes today’s loans more desirable?
In the past, mortgage loans in Mexico for US citizens required 40-50% down, with over 8% interest, payment terms over 15 years, and were often cross-collateralized on US real estate. Today, mortgage loans are available with 20% down, interest rates start at 6.75%, and payment terms are over 20-30 years.
How is the mortgage loan secured?
Loans are secured on the real estate in Mexico being purchased, not on US property. In the past, loans in Mexico were often secured by real estate in the US, which would allow the lending institution to foreclose on the secured property in the US in case of default.
Is the interest paid on the loan tax-deductible?
Per IRS regulation Section 163 (C), as well as Publication 936, interest paid on primary and secondary residences up to an aggregate one million dollars in loan amount is tax deductible. The IRS regulation does not specify that the home must be located in the United States, and thus it is the opinion of the reputable tax consultants that interest paid on a home loan on property in Mexico is in fact deductible (please consult your tax advisor for applicability to your specific tax situation).
What is the minimum and maximum available loan amounts?
Generally, minimum loan amounts are $50,000 and maximum loan amounts are currently set at $5,000,000
How important is the mortgage broker in the transaction?
Unlike loans in the United States, closing real estate and lending transactions in Mexico is more complicated and time consuming. Mexico transactions can be significantly delayed, and even cancelled by the seller, with even the slightest of documentation errors. It is important to seek representation by a mortgage broker that is reputable and has successfully overseen, processed and closed transactions in Mexico. The best advice is to ask for references on the broker, to ensure they have a significant number of Mexico transactions closed and will successfully represent you in the transaction.
How does Finance North America go about qualifying a buyer?
Our qualifying types are similar to the requirements needed for US mortgages. This includes (but is not limited to):
Full Documentation: We use the borrower’s tax returns for the last two years, as well as W-2 for two years and current pay stubs to determine if they qualify. Rates are the lowest with this form.
Alternate Documentation: Instead of tax returns and pay stubs, we use 24 months’ worth of bank statements. We only look at the deposits in the account, then add all deposits and average them out by 24 to grant qualification.
Stated Documentation: Stated documentation bases qualification on credit score and / or cash reserves. We require a minimum FICO score (credit score) of 680 to qualify for Stated Documentation, as well as higher cash reserves.
"Finance North America has helped turn our long time dream into reality…. I have already referred several of our good friends to FNA, and will definitely continue to do so…"
-D. N., Illinois
