Closing Costs
-
Closing costs in Mexico are a lot higher than closing costs in the US. Please count for between 5% and 8% of the purchase price on average depending on the loan amount. All closing costs are paid by the buyer in Mexico.
Loan Origination Fee:
This is the fee that the mortgage broker gets paid for originating and funding your loan. In Mexico, there is no Yield Spread Premium being paid by the bank. Yield Spread Premium or YSP is what the Bank pays the mortgage broker for selling a particular interest rate. Payment of YSP is the reason that in the US, you can get a zero origination (zero point) loan. The mortgage broker is selling a higher rate to the client and he is being compensated by the Bank. In Mexico there is no YSP paid. The rates are fixed and there is no ability to buy down the rate or for the broker to sell a higher rate. In Mexico all mortgage broker income is paid by the Borrower and it is disclosed on the Good Faith Estimate. In the US the standard broker income is 2% per transaction. Here in Mexico, the income remains similar whereas the timeframe and workload for the Mortgage broker is easily quadrupled.
Appraisal Fee:
In Mexico there are 2 appraisals conducted for every financing purchase. They are the Commercial Appraisal and the Catastral Appraisal. They are described below individually.
Commercial Appraisal:
This is the appraisal conducted by the lender for their value purposes and your loan purposes. It is done in a US style and is done by a US certified and Bank approved appraiser. Each lender has its own way to calculate this fee, but it ranges from .10% of the purchase price with some lenders to being based on the square footage of the home with other lenders.
Catastral Appraisal:
This is the appraisal conducted for Mexico valuation purposes. It records the value of your new home with the Mexican Government.
Credit Report Fee:
This fee is a direct cost of your broker pulling your credit report.
Processing Fee:
This is the fee for the processing of your loan.
Underwriting Fee/ Wire Transfer Fee/ Funding Fee/ Courier Fee:
These fees are all Bank related fees and all represent their respective services.
Shipping/ Handling Fee:
There are several sets of documents that your mortgage broker mails international during the course of your loan. This fee represents these charges.
Lender Transaction Fee:
In Mexico, there is a 1% fee due to the lender in some cases for the use of their product. This is very different to the US where the lenders are competing for your business. In Mexico there are only a couple of lenders and there is much demand for their product and this is the fee levied to their consumers. Depending on which loan program you choose, you may or may not be subject to this fee.
Settlement Or Closing Fee:
In Mexico it is necessary to use a 3rd party closing company for the management of all 3rd parties involved in this complicated transaction. We use P&H closings exclusively. They manage all permits, escrows and appraisals required and arrange the closing with the local Notario for your transaction.
Notario Fee:
A US Notary and a Mexican Notario have completely different responsibilities. A Notario is a State appointed attorney. A Notario’s signature needs to be on every title recorded or it will not be valid in Mexico. Their fee is non-negotiable as is their participation in your transaction.
SRE Permit:
This permit attaches itself to the home. Essentially it ensures the property is in a state where title is clean, clear and ready to be transferred. For us to order this document, we collect the water bill, tax bill, copy of current title, condominium regime and all homeowners association docs and submit them to the Ministry. The SRE permit can take anywhere between 2 weeks and 45 days in some cases and is handled by the Bank or the closing company.
Trust Setup Fee:
Your Mexican Bank Trust or Fideicomiso as it is legally called is the 3rd party instrument used for you to take title. It gives you renewable 50 yr leases on the property and is the instrument that has been used for most all foreigners taking title in Mexico since 1972.
Trust First Year Fee:
Your yearly trust fee is fixed and is prepaid at the beginning of each year.
Trust Recording Fee (AKA Trust Registration and Guarantee Registration):
This is the fee paid to record the trust with the Government. It is based as a percentage of the Catastral Appraisal which is essentially your purchase price.
RNIE:
This is another fee related to the setup of you trust.
Acquisition Tax:
This is your Real Estate transfer tax. It is paid at the time of initial transfer of title and is paid every time there is a transfer of title in Mexico on any property. The yearly property taxes thereafter are miniscule compared to the US. You can calculate them as being an average of around .10% of the purchase price for the year, however exact figures should be requested on a case by case basis.
No Liens Certificate:
This certificate ensures that your property is free of liens.