Friday, October 7, 2011

Financing in Mexico is possible...and affordable!

Purchasing a property in Mexico is an exciting decision and there are now more options than ever to finance your home! For some people, financing in Mexico represents the opportunity to pursue a dream that may not have otherwise been tangible.  For others, obtaining cash to purchase a property may not be an issue, and so the question becomes, “Why consider financing?"

Keep national and foreign investments separate.  Some people may decide to pull equity from their properties in the US or Canada to finance their Mexican purchase.  This is an option, but it also ties all of your investments to one source.  You may consider keeping your national and foreign investments separate because if something were to go awry in either location, the investments in the other location would be safeguarded.  This also prevents tying up equity that could be used for college, emergencies or retirement funds.

Leverage.  As your home appreciates in value, it will increase at the same amount whether you have invested 25% into your property or 100%.  If you have $500,000, you could use all of it to pay cash for a $500,000 property and gain around $30,000 in annual appreciation at a modest 6%.  But why not consider $150,000 cash for a down payment on a $500,000 property and finance the rest?  Now, not only have you used less money to purchase a property, but your annual rate of return on your appreciation is higher and you have $300,000 remaining in cash reserves.

Future investment opportunities.  Anyone who has visited Mexico has seen the opportunities for real estate investment.  By using the concept of leverage to your advantage, you better utilize your cash, which allows you to pursue additional investment opportunities.  From the example above, you can purchase a $500,000 property by paying only $150,000 cash and financing the rest – this leaves you with $300,000 to invest in additional properties that you can either rent out or flip for a profit.

Extra level of protection that title is free and clear of encumbrances.  By having a lender involved, the transaction won’t close until the title is absolutely perfect.  In most cases, the lender has the greatest risk in the property and they will ensure the Notario (notary) brings the title up to date and free of liens.  Title insurance is not required by most lenders but is optional for the buyer to purchase.

If you pay cash, it is expensive to pull out cash out from your Mexico equity in the future. Once cash is invested into a property in Mexico, it is difficult and expensive to pull it out later.  The maximum cash-out is only 50% of current value, so you have to leave 50% equity in the property.  In addition to paying loan fees, you will have to pay taxes and various other fees a second time. Save yourself the trouble and put the minimum amount of cash into the property as long as the monthly payment makes sense for you.

It has become difficult and expensive to get a home equity loan in your home country.  Buyers used to bring cash to Mexico to purchase a property through a home equity loan in their home country.  Equity in properties has diminished, and it is much more difficult to qualify for an equity loan in the US or Canada.  Even if you do have equity in your property, interest rates have gone up, loan fees have gone up, and underwriting guidelines have become much more difficult for an equity loan approval.

Ultimately, It is better to finance through a broker, rather than directly through a lender, because you will have access to more options. Loan experience in the US or Canada is certainly valuable, but because the Mexican process is different it is important for you, as a borrower, to be sure you choose a broker that is experienced in Mexico.  The best way to ensure this is to ask questions about how many loans they have closed in Mexico and to request contact information for references.  This will give you a much better idea of their experience and the quality of their work.

Resort Real Estate Services has chosen a preferred mortgage broker to work with in Mexico.  Mortgages In Mexico was the first loan broker in Mexico, they have loan officers all over Mexico, and they are a trusted and successful mortgage lender in Mexico.  Having closed hundreds of loans in Mexico, along with their professionalism, make them the best choice for obtaining a mortgage.  They represent all of the reputable sources of money in Mexico and are available to discuss loan options with you.  It is always a good idea to be pre-qualified so you have a better idea of what to look for when you begin shopping for properties in Mexico. 

You can begin this process by visiting their website http://mortgagesinmexico.web-loans.com/loancenter.aspx and filling out an online loan application.  Their website also has additional information about financing and contact information for the loan officers covering your area (www.MortgagesInMexico.com). If you have any questions about financing or would like more information about the process, please contact Doug Jones, President of Mortgages In Mexico at doug@mortgagesinmexico.com, telephone # 918-398-9588 (US/Canada) or 555-350-6331 (from within Mexico).

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