Mortgage Loans in US Dollars (Cross-Border Mortgages)

Most of Mexico’s largest commercial banks are subsidiaries of large multi-nationals. Some have started offering, through U.S. affiliates, cross-border mortgages for Mexican real estate, lending money in dollars to U.S. and Canadian residents to buy property in Mexico.

This kind of financing is also being offered by a number of mortgage companies. The amounts being loaned for property acquisitions has been increasing at a steady rate, and the lenders involved in the process expect the amounts to expand even more rapidly in coming years.
 
The maturities and rates offered vary from bank to bank. Loans are available from three years to 30 years. Rates on dollar loans are lower than those on peso loans, but higher than those on mortgages for buying property in the U.S.

Some are fixed-rate, and others are linked to international benchmark rates, plus a premium. Also, the cross-border loans  will be for a maximum 70% of the value of the property being bought, and the minimum amount of the loan is usually US$100,000.

Charges and paperwork requirements for these loans are similar to those for obtaining loans in Mexico (see below). They include minimum credit scores, mortgage life insurance, property damage insurance, official identification, proof of income, copies of tax returns and bank statements. They also include commissions for opening a credit, charges for credit score, and property valuation. The same documentation related to the property are also required.

Mortgage Loans in Mexican Pesos

Mexican banks have increased their mortgage lending in recent years, lowering interest rates and extending the length of the loans.

Obtaining a home loan in Mexico is a more complicated process, however, than in the U.S. or Europe. Part of the reason for this is that, in the event of a default, foreclosure on property is a lengthy and much more complicated process, so lenders take additional precautions.

Typically, Mexican banks offer loans ranging from five years to twenty years, although some offer longer loans.

It’s unusual for banks to finance 100% of the value of a property – although 80% to 90% is common these days, depending on the value of the home in question.

Rates of interest for the period of the loan are usually fixed for the term. Fixed interest rates vary with the length and type of loan, and currently fixed rates are between 11% and 15% a year.

Foreigners Financing Mexican Property

If you’re a foreigner living in Mexico and seeking finance from a Mexican bank, most banks will require that you have an FM2 (migrant) visa. However, banks will accept FM3 (non migrant visas) in some cases provided that you can produce your foreign bank statements which back up your financial circumstances. It's not absolutely necessary to be resident in Mexico to get a Mexican loan in pesos.

Applying for Credit in Mexico

You do not need to be a Mexican national to avail yourself of credit facilities in Mexico. However, you do need to be legally resident (showing a FM3 or FM2 visa) and be able to prove your income.

You will also need a bank or credit reference from your home country. Banks will sometimes open accounts without references, but in these cases, a significant deposit will be required to secure any credit line (e.g. credit card) the bank may afford you.

Credit may be applied for directly from a bank or, if you are buying durable goods, the credit application may be made through the company which is selling you the goods.

Whether you apply directly or via third party, you will need to provide references and the bank will make a credit enquiry via the National Credit Bureau (see El Buro, above).

If you have recently moved to Mexico, expect to be able to prove your income using bank statements, letters from a bank you already have a relationship with, a letter from your employer -- or a combination of these.

Added Services

Banks in Mexico seem expert at adding on 'value-added' services to agreements, such as insurance policies, when you take out a credit for a car or other durable good. This means that the added service(s) (e.g. insurance premium or service guarantee) is "spread out" over the term of loan ("easy terms") but it also means that the additional services are being priced at their cost plus interest. It's always better to keep these extras away from the loan account.

Sales Tax on Interest and Charges

All bank charges, apeture fees, commissions, and credit interest are subject to sales tax in Mexico. Mexican sales tax is known as IVA: Impuesto del Valor Agregado (Value Added Tax). In Mexico, your real rate of interest is the CAT  plus sales tax.

Charges and Paperwork

As with most financial loan products, there are number of charges and required documents to file in order for the credit to be released.

Charges

Common charges to open a mortgage account include: commissions, charges for conducting socioeconomic studies of potential borrowers (which some charge you whether or not the loan is granted), mortgage life insurance,  property insurance, home valuation and Notary Public expenses (notary expenses are paid direct to the notary).

Checks and Research (Paperwork)

Before they lend you the money, the banks conduct extensive investigations of their potential clients, including proof of income, checking the credit bureau for your credit history reports, as well as socio-economic studies to assess the risk of the loan.

Among common loan requirements are:

 

• A minimum age, usually 18 but it depends on the bank, and not older than 70
• Proof of income (dual incomes can be considered for couples)
• Bank references and recent statements
• Official identification and proof of address
• Birth certificate and marriage certificate if applicable
• Immigration documents, e.g. FM2 or FM3

Documents related to the property such as:

 

• The sale contract
• Proof of down payment
• Copy of the deeds (of the land in the event the loan is for construction)
• Copies of receipts for rates and water bills
• Copy of architectural plans

Notice

UNIKA REALTY guides and briefings are provided for information only. Figures and rates may change without notice. Our guides do not constitute financial or investment advice to readers. Seek professional advice before entering into any agreement or contract.