FINANCING YOUR FOREIGN INVESTMENT: IT’S A SNAP
Financing has previously been available in Baja Sur for numerous years through well known US banks. This has not been the case since US Banks pulled out of the area midstream of the US Economic crisis. No explanation was given at the time. There are several companies that came back into the area offering private financing in 2013…one, Mexico Capital mortgage, has been in the area for numerous years, and some buyers may find short term, small dollar financing a great benefit over liquidating assets elsewhere. Ventanas Residencial, a beautiful 5 star amenity development offering condo and single family residences, now offers developer financing amortized at 10 years with 35% down. You will find, however, that these specialized financial partners will charge a hefty annual percentage rate…from 8-16% for qualified Americans and Canadians. Peso loans are still available for Mexican Nationals interested in buying the home of their dreams here at land’s end.
As a buyer, your money is held in 3rd party escrow inside the USA, and title insurance is available. You’ll find the process has been streamlined and closings that were 90 days minimum are now finalized within 30-60 days as long as 3rd party interference does not occur. This could include inadequate documentation or additional document demands from the bank where the seller’s trust (title) is held.
Mexico Capital Mortgage, (formerly Baja Capital Mortgage) officially founded in 2005 with the inception of traditional US style home loans into the Mexico real estate market, comprises 30yrs of banking, international business, and real estate development experience. They are, to date, the only local mortgage broker originating, processing, and closing loans from within Mexico.
Offering every major mortgage program offered in Mexico, MCM loan programs include the new cash out re-fi that allows home owners to pull the equity out of their Mexican home, several purchase programs with the most competitive rates in Mexico and a construction loan program that allows clients to finance the purchase of their raw land.
Prospective buyers can choose from numerous plans to finance their pre-built home or the construction of their home, or customize a solution that best fits their financial needs. Pre-qualification can be obtained within 24 hrs, taking just moments of your time while you’re here on vacation, or from your home upon your return through electronic means. The MCM service standard offers you, the buyer, a streamlined, expedited process with a seamless financial solution. We highly recommend them for their well-deserved reputation as knowledgeable, creative and customer oriented service.
The Mexico loan process is a bit more complicated than a US loan and various 3rd party Mexican institutions need to be dealt with to co-ordinate the funding of these loans. You should expect your closing to occur in about 90 days. Though this seems like an exhorbitant length of time, you’ll find that the detailed research and work completed in your behalf to ensure a safe and sound transaction occurs is well worth the wait.
The rights to your property here in the ‘Coastal Zone’ of Mexico are provided through the administration of a Mexican Trust through a Mexican Bank, called a Fideicomiso. The Fideicomiso Trust allows the borrower/buyer to become the Beneficiary of the Trust, much as in a Family Trust in the USA.
A Fideicomiso has a lifespan of 50 years, but is thereafter renewable in 50 year increments. You will be required to make a small annual payment to the bank for their fiduciary responsibilities on your behalf, but the title is in your name, and lists your heirs for inheritance purposes should anything happen to you within that span of time.
As Beneficiary, you are entitled to all typical land ownership rights you are accustomed to in the US, including the right to a mortgage and the right to rent, improve, will, sell or profit from the sale of your property at your own discretion. Upon sale of the property, buyers may assume the existing Trust if it still holds a number of years, (called a trust transfer) or you may cancel the old, and form a new Trust with all proceeds minus appropriate taxes going to the Beneficiary at closing
The Trust Cancellation letter is submitted by the seller or his representative. This can be a loan delayer, so we advise confirming this with the seller upon submission of an offer on any real estate purchase that will be financed.
The SRE permit allows a foreigner to own property in Mexico. This permit is requested upon submission of a water bill, tax receipt, title, and condominium regime and can only be requested once these documents confirm the property is lien free, and verifies the identity of the rightful owner.
These documents are usually collected by the Real Estate broker representing the seller; however we do employ a closing company to collect these documents. Ensuring that that the Seller has these documents on hand contributes greatly to a smoother, quicker close.
Most banks will require 2 appraisals. A US style appraisal and a Catastral appraisal (Mexican appraisal) for tax purposes. Your representative agent will schedule a final walk through prior to closing if there were any contingencies to be dealt with, such as repairs or other property upkeep.
Most agents will (or should) speak with you about the limited Power of Attorney preferred for closing purposes. This POA is limited to the process of selling/buying THIS ONE property. Because most buyers are foreigners making offers during a short stay in the area, a limited POA allows freedom in scheduling the closing, but whether the buyer will be present at closing must be determined in advance, as the language in the Trust and disbursement documentation is affected dramatically by the buyer’s availability status.
It can be confusing, or seem very complicated, but our client services staff will manage the process for you to make it a pleasant experience!