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.

"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
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Down payments as low as 20% / LTV’s up to 80%
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Financing for Americans and Canadians
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10, 15, 20, 25 and 30-year terms available; both fixed and ARM products available
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Rates from 6.5% - 8.99%, depending upon lender and product
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Loan amounts from $50,000 to $5 Million
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Minimum FICO score is 650
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No geographical restrictions
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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).
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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

Mortgages In Mexico has been very busy. As anticipated, this is definitely the year of the Canadian!! 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.

Greetings, up until now, only mortgages for Primary residence or second homes were available, meaning only one loan per person. Some exceptions were granted where homes were in different geographical locations,
but that was the exception, until now.

Deutsche Bank has now decided to open their Financing products to BCM. The highlight of their program; and how we see it as a value add for our Realtors and clients is that they are now allowing up to 3 loans per person. This is a first and something we have been waiting for in the Mexico marketplace for some time. The 3 loans can total a maximum of $6,000,000 for each borrower. This product is now available for British, US and Canadian citizens and should allow realtors to pitch financing on several homes at a time as opposed to just one allowing you to maximize the amount of possible sales per person.

Please let me know if you require more specifics on this program or if you require your clients be pre qualified, just have them fill out the attached application and I will provide you a Prequalification in 24yrs or less.

Regards, Ryland Apsey

tom@carpediemyucatan.com

From US: 713-893-8300 Office
From MX: 558-421-8311 Office
From US: 713-529-8078 Home
From MX: 998-121-1316 Cell
Skype: cdymexico

www.carpediemyucatan.com

Hollerith Underwriting Services S.A. de C.V.
RSH Commercial Mortgage Professionals
Commercial Loan Underwriting & Services
- Setting the Standards for Ethical Business -

We serve you in German, English and Spanish language!

We provide:

Commercial lines of credit
Commercial Development financing
Refinancing from existing, operating commercial projects
Hotel Financing
Mining Funds
Funds for projects of social interest (low cost housing, Energy related projects, recycling etc.).

Minimum Loan amounts conventional:

Mexico/south Americas 10 Million US if international funds are requested

Mexico 5 Million US if national funds will be accepted

USA 3 Million

Canada 3 Million

Germany/Europe 10 Million

others - case by case only.

We look forward to hearing from you. Thank you for your consideration.

Important note for Latin American projects:
if international funds are desired documentation has to be submitted in English language
including legal documentation such as Corporate Documentation, Property Title, Notary documentation, permits, etc.
If you seek national funds documentation can remain in your language and has not to be translated.

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 Cozumel Living.