The Costs of Mexico Real Estate - An In-Depth Look at the Market Today vs. Yesterday
As the market continues to force professionals to determine new business generation strategies, most realtors and developers are now discovering what really fueled the Mexico resort property boom over the last decade. Although this market has always been referred to as consisting of "almost entirely cash buyers", today's economic turmoil has inadvertently exposed the fact that so called "cash buyers" predominately needed some type of leverage for their Mexico real estate purchases. Without the leverage, the Mexico real estate market's boom would have been significantly calmer.
In retrospect over the last decade, many would be surprised what you find when you further peel back the layers of those "cash buyers". What is uncovered are the sources of what looked like cash to the realtor and developer but was ultimately some type of debt or equity capital from one's performing assets. Those sources most commonly included second mortgages and home equity lines on buyers' primary residences allowing "cheap" funds and liquidity to purchase second homes in Mexico's luxurious markets. With the U.S. mortgage market changing drastically over the last twelve months, so did the cash sources and cost of purchasing Mexico real estate.
As a result, today's market is quite similar AND quite different than yesterdays. What remains similar is that buyers need to leverage some type of asset to purchase a second home in the resort areas of Mexico. What differ are the type of assets to be leveraged and the costs of that leverage. While the desire to purchase Mexico homes is far from lifeless, most of today's Mexico buyers must now finance the Mexico property itself through traditional cross-border Mexico mortgage financing rather than leveraging other assets including properties in the U.S.
Yes, Mexico mortgage financing is more expensive than yesterday's second mortgage and home equity loans! However, financing in today's more challenging economic times is more expensive in general and again, lacking transparency. Just how expensive today's Mexico mortgage financing really is needs to be better understood by the real estate community. In order to educate potential buyers, one must completely understand a real comparison between yesterday and today and, more importantly, financing options so they may continue to sell second homes in Mexico. Without this understanding, potential real estate sales opportunities will certainly be lost!
We have provided a document we title "Understanding the Good Faith Estimate (GFE)" which clarifies, in great detail, the costs of financing a Mexico second home as compared to paying with cash (e.g. leveraging a U.S. or Canadian based asset).
This document is a complete road map to understanding all costs associated with purchasing
a home in Mexico with cash or with financing.
To view the document, please click here
If you are looking for something less detailed than our "Understanding the GFE" document,
we have provided you with a brief summary below which describes the financing costs
that are above and beyond the costs to purchase with cash.
Loan Origination - All mainstream lender programs charge a 1% origination fee regardless of whether they
"wholesale" through a broker to offer their programs to the public
Credit Report - Fee varies with a maximum of $60.
ConfiCasa does not charge separately for credit reports unless a Canadian client.
- - Mortgage Broker Fee - Fees range between 1-2% depending on lender, loan amount and property. The fee includes extensive preparation of all loan and property specific documents, including gathering, reviewing and analyzing documents from the borrower and third parties in order to obtain loan commitment. All fees are charged on the front-end as opposed to buried in the interest rate (known as yield spread premium, as done in the U.S.). We discuss mortgage broker fees vs. yield spread premium in PART II of III of our Spring 2009 Newsletter: Comparing U.S. and Mexico Mortgages; How Different are Rates, Costs and Programs?
- - Processing Fee - A processing fee of $595 is charged upon submission
- - Underwriting Fee - Fee varies with a maximum of $600 and is charged by the lender
- - Wire Transfer Fee - Fee varies with a maximum of $150 and is charged by the lender
- - Funding Fee - Fee varies with a maximum of $150 and is charged by the lender
- - Courier Fee - Fee varies with a maximum of $100 and is charged by the lender
- - Registry Guarantee Trust - This provides for the lender to legally register a guarantee for the loan with public registry, allowing them to secure the property as collateral on the loan. Fees are charged by a third party and are based on a formula from the Notario and are finalized just prior to close.
- - Interest - Lender requirements for interest credits vary. Usually, interest is collected at closing prorating your first monthly payment for 45 days following the close of Escrow.
Before we get down to business, Cross Border Investment would like to wish you all the best in 2012!
At Cross Border Investment, we like to keep you informed and would like to update you as to recent changes in the mortgage industry as it pertains to foreginers. One of the most well-known lenders in the industry has suspended its program indefinitely. The bank did offer some favorable rates and terms, but there are still other options available. There is even a new peso loan available for foreigners!
For US and CND citizens and permanent residents, they can qualify for a US dollar OR peso loan. Here is a breakdown of the loan conditions:
For the USD loan, buyers can expect an interest rate of 7.59-8.75%; minimum 35% down payment; there are ARMs, fixed and balloon rates available; the loan term can be from 10-30 years; and there is a 2.16% prepayment penalty for the first 5 years.
For the peso loan option, borrowers can expect a fixed interest rate of 10.90%, 25% minimum down payment, the loan term can be from 5-20 years; and there is no prepayment penalty. Although the interest rate is higher for the peso loan, if the peso/ USD conversion rate continues along the same pattern as it has been for the past 15 years (i.e.: the peso devaluing against the dollar), it is expected that this loan would actual result in a 16% savings against an 8.0% interest loan.
Please review the “mortgage” section of Cross Border Investment’s website for up-to-date information about loan conditions.
The qualifications for all the loans are based on the client's credit score and income versus debt – i.e.: the client’s ability to pay back the mortgage. Specific guidelines change from lender to lender so it is best to contact your Cross Border Investment representative so he can analyze the best option that suits the buyer's needs.
The same is true about peso loans for Mexican nationals – it is important to work with a broker to ensure the buyer gets the best deal, and to have a better chance for loan approval. Cross Border Investment works with about 95% of the loan options available for Mexican nationals, so we are sure to get the buyer the most favorable rates and terms.
Remember Cross Border Investment has all the loan options available - for US and Canadian citizens and permanent residents (US dollars & pesos), for Mexican nations and permanent residents (pesos) and for English and Spanish citizens (Euros). We offer all available loan options, premium customer service and fair prices – making us your best mortgage option available.
Please contact your Cross Border Investment representative today for more information.
All the best,
Cross Border Investment
Prol. Brasilia 889 | Col. 5 de dicimebre | Puerto Vallarta, Jalisco | 48350
MEX: (322) 222-1113 | US: (281) 978-4635 | CND (416) 840-6724
"Get approved today and invest in a strong Real Estate market here in COZUMEL.....
Attached are our new programs for Cancun and Cozumel. If you have any pre-qualifications
that you need, email them to me, no up-front fees for credit approvals." - Erling Halvorson
Purchase, refinance, cash-out refinance, construction to permanent
(can do construction-to-perm loans for BOTH homes AND condominium units).
Single-family homes, condominiums and bare lots
Down payments as low as 20% / LTV’s up to 80%
Financing for Americans and Canadians
10, 15, 20, 25 and 30-year terms available; both fixed and ARM products available
Rates from 6.5% - 8.99%, depending upon lender and product
Loan amounts from $50,000 to $5 Million
Minimum FICO score is 650
No geographical restrictions
Documentation types available include full documentation (tax returns/pay stubs to prove income),
alternative documentation (bank statements in lieu of tax returns) and, in some special cases,
stated income/verified assets (proof of assets, not income, required).
Always free and quick prequalifications
(initial answers given within 30 minutes of receiving completed form).
No upfront fees to borrowers, ever; lowest closing costs of any broker in Mexico, guaranteed.
We will always meet or beat any legitimate Good Faith Estimate of any other broker/lender.
Proven track record of closing loans in Mexico
Eric M. Levitt
Principal & Founder
USA line: 480-634-1662
24-hour USA Fax: 602-445-9901
Your agent in Cancun & Cozumel
USA line: 360-389-6743
Toll Free Fax: 866-385-4951
Mortgages In Mexico has been very busy. As anticipated, this is definitely the year of the Canadian!!
We were informed late yesterday that BBVA Compass is no longer doing loans in Mexico. This is a permanent decision and they will continue in operation until they close their last approved loan in the pipeline and will not be accepting any loans that are not already approved. We have anticipated this for months and have not been originating any new business to be sent to Compass. This announcement by Compass is a major blow to mortgage financing in Mexico because they had been our major source of mortgage money in Mexico. Their recent actions have indicated they no longer had a desire to do mortgage lending in Mexico. Downpayment requirements went from 20% in early 2011 to 25% in February, then to 40% in November, and finally 60% in December. Had they not changed their lending requirements dramatically over the last 90 days, this discontinuation of their Mexico lending operations would have been a shock. However, since we have seen “the writing on the wall” for months, Mortgages in Mexico has taken a pro-active stance in what we can do to continue to offer mortgage financing for real estate in Mexico. Since I am an approved NMLS (National Mortgage Licensing System) mortgage broker in the US, we have been able to put together a very unique combination of loan programs that are not available from any other lending source in Mexico. NMLS is a national registry in the US that is required for all loan officers who originate loans for properties located in the US.
There IS still mortgage money available in Mexico with a downpayment of 35%. This downpayment plus closing costs still represents a cash requirement that is more than many buyers have, or are willing to invest into Mexico real estate. Although I have been lending exclusively in Mexico for over 7 years (since 2004), I have maintained my mortgage broker license in the United States – and it’s a good thing I have done so. This is not an easy license to maintain. It requires continual education every year, an FBI background check, and strict adher.
We have had approximately 50% of our new loans since the first of the year with Canadians. We now have two (2) excellent sources of Canadian money available. These programs vary in length from 20 to 25 years. Interest rates vary from 7.5% to 9%, and the down payment requirement is from 25-35% down. We also have money for those difficult to qualify "self-employed" Canadian and US buyers. We are able to qualify these buyers with 6 months of bank statements instead of using the (usually) limited income shown on their tax returns. We are still going strong with US buyers as well.
The question on everyone's mind is will interest rates in Mexico come down as a result of the recent Federal Reserve drops in the US. The answer is no. The Federal Reserve changes are designed to affect short-term rates, and in fact the LIBOR index (used to determine what a new adjustable rate payment will be) has come down over 1%. This is good news for people who have adjustable rate loans. Unless and until short-term interest rates remain low for a long period of time, there will not be a drop in interest rates for Mexico loans. The risk factor for Mexico loans has already been calculated into our existing rates, and in spite of the ups and downs in the US markets over the last year and a half, we haven't seen any changes in our Mexico rates - it is somewhat, but not totally insulated from the US markets.
Mortgages In Mexico is anticipating the return of GMAC back into the market sometime this month. They have been purchased by a Wall Street brokerage company who has been eager to get into the Mexico mortgage market. We anticipate being able to loan in excess of $1 million loan amounts, and a stated income program. This fits very well with the financially sophisticated client who prefers not to divulge every detail of his/her financial life. GMAC will be known under a different name when they come back into the market.
We are also anticipating new and improved guidelines from GE. GE recently lowered their maximum loan amount to $1 million. We believe we will once again be able to loan in excess of $1 million with GE as well. We will be getting specific guidelines probably by the end of February and will keep you posted on the changes. We know there are new procedures which will prevent delays that were caused by "multi-level" approval processes. This meant we had to get a loan approved by several different levels of management, which added time and requirements. Our primary underwriter will have authority to approve loans up to $1 million. This will be a HUGE time savings. Previously the underwriter could only approve loans up to $300,000 before it had to get further approvals from upper management.
We continue to see more and more larger loans. Since the first of the year, we've taken several loans in the $600-800,000 range, one for $900,000 and 2 loans of $1 million or more. In addition to GE and GMAC coming back into the market with loans of more than $1 Million, we currently have a lender doing these larger loans. These loans can also be made to previous customers of yours who want to take some cash equity out of their homes in Mexico that you sold them. We call this a "cash-out" refinance. Existing homeowners/investors see what is going on with increasing prices in Mexico, and they want to invest in other properties in Mexico. The US market is a good 2 years away from starting to go back up, and these savvy investors want to park their money in good investments. Mexico real estate is an excellent choice. Now may not be a good time for investors to pull equity out of their real estate in the US because the values of their homes (and available equity) continue to go down.
It may be easier to refinance a Mexico home right now than it is in the US!
Here is the financing overview for Mexican Mortgage lending provided by MortgageIT, a subsidiary of Deutsche Bank:
Up to 70% financing for second home, and 50% for investment properties. We have a cash out refinance product up to 500,000
and more if the refinance happens within 15 months of purchase.
Borrower must have 680 score , proof of citizenship, and have assets, such as stocks bond mutual funds, equity in homes or equity in a business which is equal to the loan amount. Stated income for future projects must have advance commitments with full documentation. Loan max is $4,000,000 per property and minimum is $150,000. Maximum of three properties per borrower, capped at $6,000,000 in cumulative loans. Properties must be in condominiums, gated communities, or upscale neighborhoods. We can lend to US, Canadian and UK citizens ...and soon the Republic of Ireland No life insurance required No medical examination required.
The program is based on a 30 year amortization program on a 5 year ARM/no balloon payment. There is a 5 year Pre Pay Penalty on this loan in a 5 ,4,3,2,1 descending order. We can close in an LLC.
and also have programs for developers. Mortgage IT, a subsidiary of Deutsche Bank.
Senior Loan Officer
USA Mobile: 917-972-0060
MCM is a Los Cabos, Mexico based mortgage brokerage offering US dollar loans to US and Canadian citizens for the purchase of homes, condos, raw land as well as new home construction. MCM offers every competitive loan program currently available in the marketplace, funds in all resort destinations across Mexico and does so with the service and expertise of a market leader. Key relationships with developers, attorneys/notaries and appraisers allow MCM to offer mortgage services unequalled in Mexico. With 5 years experience in the marketplace and hundreds of residential transactions in Mexico in the portfolio, MCM has successfully bridged the gap between promising and providing a reliable cross border product and service.
MCM has partnered up with every source of funding in Mexico to offer the widest portfolio of lending products Mexico has to offer. MCM offers over 150 different loan programs with some of the basics of each outlined below.
Residential purchase / Cash out refinance
30yr loans starting at 6.5%
20yr loans starting at 6%
MCM is now lending at 65% loan to Value utilizing the land as collateral. Rates from 7.5% with approved builders. Construction to permanent loan with a 1 time close and no max loan amount.
Cash out refinance
Clients can now cash out 50% of appraised value with a maximum loan amount is $1,000,000
15/20/25/30 yr adjustable and fixed rate loans with rates from 6%
Raw Land Financing
Available to US and Canadian citizens
15yr note with rates from 6.5%
First Off- Happy New Year!
As many of you are already aware, there have been some big changes within the Cross Border Mortgage Industry in the past few months. Regrettably, some in our field have announced these changes prematurely, erroneously or both. We at MEXLend would like to take an opportunity to set the record straight
1. Compass Bank - our lead lender for the past several years - has stopped lending in Mexico. Compass is an enormous banking entity and their Cross Border/Mexican operations represented only a small part of their overall business model. Due to world market situations - they simply felt it was time to pass the torch, as it were.
2. That torch has been passed to another bank - under the same umbrella as Compass’ parent company - but with different operational and procedural requirements. Consequently, we are thrilled to announce the launch of a brand new lending product, effectively immediately. On Friday, January 6th -Team MEXLend was the first to be trained in these new guidelines and are authorized to begin marketing them right now. These loans work a bit differently than what’s been offered in the past.
A few key points:
***Yes, these rates are among the highest. However, payments are made in Pesos and borrowers reap the benefit of the Peso to Dollars Conversion Ratios.
3. This product is only being made available to a select group of Brokers. All banks have rigid requirements for broker approval and this new lender is being particularly conservative to who it is allowing to represent them. MEXLend is proud and thrilled to be among the few chosen to do so. Please be cautious and skeptical as you speak with other Mexican or Cross Border Industry professionals. As would be expected, those Brokers not able to access this lending products are not happy about it. Unfortunately, some are sharing incorrect information. In the spirit of fairness though, MEXLend has sought and garnered BANK permission to accept applications from outside brokers on these loans. Meaning, any reputable Mortgage Broker - who cannot submit directly to the bank because they do not meet the lender’s corporate structural requirements - can do so, by way of MEXLend. We are happy to assist any and all who are looking to finance in Mexico. We feel this approach- can only serve to better our market overall.
Lastly, and in closing, the lending scenario in Mexico is quite good. Interest Rates and Down Payments are not as low as a few years back - but nothing is quite the same as few years back.
There are 3 Cross Border Banks actively lending in Mexico. 2 lend money in US Dollars 1 does so in Mexican Pesos. There is a broad variety of product available with as little as 25% down and as is the case with most lending scenarios - the better the borrower’s income and credit score - the better the terms they will be offered.
We will be approaching each and every one of you in the very near future to schedule presentations outlining MEXLend’s new lending products for 2012. In the meanwhile as as always, please contact us at any time for any reason. We value your business tremendously!
Sincere Regards and Best Wishes for a Prosperous 2012!
Terence Reilly, David Schwendeman & Team MEXLend
CARPE DIEM YUCATAN S.A de C.V
Commercial Real Estate Loans
Office USA line: 713-893-8300
Office Mexico: 558-421-8311
Home USA line: 713-529-8078
Mexico Mobile: 998-121-1316
FINANCING FOR MEXICAN NATIONALS
HABI Fin 2021
Monte Libano No. 245 Lomas de Chapultepec
Mexico 11000 D.F. Mexico
Empresa Administradora ARSA de C.V. Hábitat 2000
Av. San Antonio No. 200
Col. Ciudad de los Deportes
C.P. 03710, Mexico, D.F.
The information on this page is provided for the convenience of our clients.
The inclusion of a finance company's name on this page should not be construed as a recommendation or endorsement by
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