Page 37 - EQ Mag-2019

REAL ESTATE INVESTOR RESOURCES (Con t)

of these services: headaches in the long run.  Proof of income (dual incomes can be considered into any binding (time limiting) contractual agreements
There is normally a minimum loan amount somewhere for couples) before the funds have been released by the bank.
in the neighborhood of $100,000 – $150,000 USD. Charges and Paperwork  Bank references and recent statements
The interest rates are typically higher than those  Official identification and proof of address Considerations when Financing Mexican Property
offered back home. As with most financial loan products, there are number  Birth certificate and marriage certificate if applicable
If you are buying the restricted zone, some lenders will of charges and required documents to file in order for  Immigration documents, e.g. FM2 or FM3 For people who have dollar incomes, the idea of
not give you a loan if you choose to structure it under a the credit to be released. borrowing in pesos may appear attractive, given the
Mexican Corporation as opposed to a bank trust known Documents related to the property such as: possibility of the peso depreciating against the U.S.
as a fideicomiso. Charges dollar, which would lower the payments (and overall
The sale contract debt) in the future in dollar terms. While exchange and
Down payment: A minimum down payment of 20% is Common charges to open a mortgage account include:  Proof of down payment inflation risks are already factored into current peso
required. For the lowest interest rates, down payments commissions, charges for conducting socioeconomic  Copy of the deeds (of the land in the event the loan lending rates, banks appear to be fairly confident that
of 30% to 40% are required studies of potential borrowers (which some charge you is for construction) there won’t be a massive rise in local interest rates,
 Loan Duration: 3, 5, 7, 10 years whether or not the loan is granted), mortgage life  Copies of receipts for rates and water bills hence the fixed-rate loans over periods as long as 15 or
 Term/Amortization: 10, 15, 20, 25, and 30 years insurance, property insurance, home valuation and  Copy of architectural plans 20 years.
 Credit scores: Minimum of 650 Notary Public expenses (notary expenses are paid
 Interest Rates: As low as 6.75%, but for more direct to the notary). Lead Times While that’s no guarantee that there won’t be a surge
attractive down payment options and higher loan in interest rates, it’s also possible that a peso loan
amounts, interest rates range from 7.5% to 9.5%. Checks and Research (Paperwork) could work out more expensive over the life of the loan,
 Maximum Loan Amount: None, on a case by case if there’s no significant devaluation. The sharp
basis Before they lend you the money, the banks conduct devaluations and surges in interest rates such as those
 Currency: All loan programs are denominated in U.S. extensive investigations of their potential clients, that caused banks to pull out of the mortgage market
dollars including proof of income, checking the credit bureau almost entirely in the mid-1990s aren’t expected to be
 Property Use: Primary, Vacation and Investment for your credit history reports, as well as socio- repeated. One indication of this is that the Mexican
government is currently borrowing money in pesos from
10 years to 30 years at less than 8% a year.

A number of Mexican banks, in particular, have
incentive schemes in place offering, for example, rate
discounts for prompt payment. However if you miss a
payment the discount rate disappears and the higher
rate may be applied retrospectively to the loan.
Banks have been improving the ‘turn-around’ for loan
approvals in recent years. Some will give a decision ‘in Some schemes offer lower rates of interest at the start
principle’ (subject to further investigation) within a few of the loan (“teaser rates”), but these are usually off-
days and may release the funds within a couple of set with slightly higher rates later on. It’s important to
weeks. The process can take much longer, though, so consider the cost of financing over the entire term in
you should be prepared for this. order to understand the true cost of the product being
offered to you.
Don’t get yourself into a non-negotiable or time-limited
contract to buy a property on the basis of a loan given Most (but not all) mortgage products sold by banks
‘in principle’ as the bank may take longer than you have no penalties for early payment. Check the small
expect to complete the necessary checks and may print before you agree to the loan if there is a chance
Properties economic studies to assess the risk of the loan.
even refuse the loan at the eleventh hour. that you may want to repay the loan early; for example,
 Property Type: Single Family Homes, Town Homes if you sell the property or pay-off the loan with the
and Condominiums Among common loan requirements are: Even when the loan is agreed, it can take up to several maturity of a different investment.
weeks for the bank to release the funds. The key thing
My suggestion compare the rates and conditions of  A minimum age, usually 18 but it depends on the to keep in mind is: stay flexible and don’t paint yourself The best advice when considering whether cash or
multiple lenders. This may save you a lot of money and bank, and not older than 70
mortgage makes the most sense is to opt for the
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