One of the most important tools for those buying Mexico real estate is a mortgage. This has become especially significant for Americans, Canadians and Europeans buying in Mexico over the past decade since mortgages have just recently come available to non-Mexican real estate buyers.
As with all financing tools, buying by means of a mortgage from a bank in Mexico has distinct advantages and disadvantages. Each buyer should carefully consider if it is the right tool for them.
If a buyer intents to buy real estate in Mexico by means of a mortgage, it is advisable that they mention this to their agent as soon as they make contact so they can discuss the feasibility and be pointed to an appropriate mortgage provider. It is best to seek pre-approval as early as possible.
Advantages of buying through a mortgage in Mexico include:
In most cases, 70% of the value of the property being bought will be covered by the mortgage.
The property being bought can be used as collateral and therefor all potential risk is tied into the Mexican property rather than another property back home.
Home equity on properties in the U.S. and Canada is left free.
There is flexibility in payment options - fixed and variable rates, 10-20 year terms, etc.
Disadvantages include:
Longer wait times and more paper work involved than with North American banks
More time is added to the purchasing process, increasing the space between the offer and the finalization of the deal; this can be minimized through pre-approval
Higher credit score requirements (and higher down payment percentage)
Stricter property requirements than in some parts of the U.S.
Interest rates tend to be slightly higher
There is usually a minimum purchase price of $100,000 USD
Most who wish to finance their Mexico real estate purchase choose this option because of the advantages of tying leveraging the same property being purchased to the mortgage. Those looking for really inexpensive properties (less than $100,000 USD - of which there are plenty in Mexico )will not have this as an option; on the other hand, with just a down payment of $30,000 USD, buyers on smaller budgets now have a much larger range of property options to choose from.
Buying by means of a mortgage at a bank in Mexico is an excellent way for Americans and Canadians on a lower budget to fit a very nice property in Mexico into that budget. It may not be for everyone, but it most certainly opens up many new doors of opportunities for investment, retiring and owning property in Mexico.
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