How much down payment is required?
In Mexico, the required down payment for a loan is a minimum of 25% down. This is applicable to loans under $1,000,000. For larger loans, a higher % of down payment is required. Your down payment is only required to be paid just prior to the actual closing/ funding of your transaction and we do need to source these funds. Only in the case of family can a down payment be given as a gift.
Are the interest rates in Mexico higher than the US and why?
Yes, they are. The reason for this is that it is always a higher risk for a bank to collateralize a foreign property than a local property. This higher risk equates to a higher interest rate. Rates have decreased here the last few years because loaning in Mexico is becoming less of a risk and our interest rates get more competitive every year.
Is the interest on my mortgage tax deductable like my US mortgage?
MCM’s residential mortgages are funded in US Dollars Collateralizing Mexico real estate available to US and Canadian citizens. The liability shows up on US credit and according to US tax law Per IRS regulation Section 163 (C), as well as Publication 936, interest paid on primary and secondary residences up to an aggregate one million dollars in loan amount is tax deductible.
How long does a loan take to fund and how do I protect my interests in the contract?
A loan generally takes between 60 and 90 days to fund. We always ask for a 90 day closing timeframe be placed in the contract to provide us ample time to close your loan. We also request that a 30 day financing contingency be placed in the contract to receive FULL approval from our Bank before any earnest money deposits become non refundable so as to protect your interests.
What is the process for a mortgage in Mexico?
Once you have been prequalified for your loan and your MCM broker has provided you your portfolio of options, you will need to make a selection and your broker will provide you a checklist of items needed to submit your loan to the lender. Once these documents have been provided to us, we turn your loan over to our processing department and our processing manager will review your loan packet. The responsibility of the Processing department is to submit your loan to the lender and request any additional documents from you that may have been left out of the loan packet or is still required from the lender. Once your loan is approved with the lender, an approval letter is sent out from the Processing department to you and your buyer/sellers agent and seller to ensure all parties are informed of the “Approved” status of your loan. At this point you will be introduced to P&H closings, our legal counsel which works closely with MCM and the Lender to ensure all permits/ appraisal/ title work is executed as per the Lenders strict criteria. They will be requesting additional documentation from you and also requesting “pre-closing” costs which are due directly to the various 3rd parties required by Mexican real estate law for any transfer of title; and are distributed as such. P&H are able to facilitate all parties locally operating from Mexico, but have a complete understanding of the USA/Mexico process with perfect levels of communication in both languages. They are not only required to order your various permits/ appraisal/ title checks etc, but can also draw up your Power of Attorney or any other legal contract as well as provide representation on any real estate matter that may be of importance to you that may not necessarily be transaction related. Once all of the pre-closing steps have been completed by P&H closings, we schedule your closing and proceed with the title transfer and funding of your loan.
Do I need to be in Mexico for my closing?
No, you do not. Because real estate closings are not an exact science in Mexico as far as being able to solidify an exact date for a closing a long way out, many clients opt to have their realtor/ attorney sign for them when the closing occurs. This is done through a Power of Attorney and is created by our legal team at P&H closings who would be happy to sign at the closing. Your final loan documents are signed at your home in the US prior to the closing, it is only the deed that is signed in Mexico at the closing table.
If I pay cash now and choose to put a mortgage on my property later, is this possible?
Yes, this is possible. We can cash out of your home at a maximum of $1,000,000 at a maximum of 50% of the appraised value of the property. A whole new closing is required where your title is recreated which makes this an expensive procedure unlike in the US or Canada. It is for this reason that we advise clients that if they feel they might in the future ever need to pull equity from their Mexico property, that they do so at the time of initial closing. This allows you to mortgage a full 75% of the property as opposed to 50% and you do not need to pay double closing costs for the 2 separate transactions.
Are property taxes and insurance included in the loan in Mexico?
No, property taxes and insurance are not included in your mortgage payments. Taxes are paid every 2 months to the city- if they are prepaid for the year, you will receive a discount which can be substantial. Count on taxes coming to between .1% and .15% of the purchase price for the year which is minimal compared with the US. For insurance in many cases there will be insurance included in your HOA payments, but it is usually required by the lender to have the home covered for the dollar value of the mortgage at minimum. Our attorneys can suggest several options which you can quote out and find the best package for your needs. This is done during the 90 day escrow with our assistance.
