How to Finance Your Home: One Option is a Cross Border Mortgage

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You’re committed to buying your new home in Mexico. You’re working through the process with your qualified real estate agent and you’re exploring options on how to finance your home in Mexico. There are 3 basic ways homes are financed in Mexico.

 

1. Buy It Outright

Primarily, homes in Mexico are bought with cash. Either there is enough in the bank or you are moving permanently and no longer need your home up north or you downsize. Or you could approach your bank for a home-equity loan and use that money to purchase your Mexico property. Of course, you have an added benefit of renting your first home while you’re in Mexico and renting your Mexico home while you’re back at your first home and use the rental revenue to help repay the loan.

 

2. Finance With a Mexican Bank

A second option is to buy your home through financing through a Mexican bank. While this is possible, especially if you’ve been living in Mexico for awhile and have temporary or permanent resident status and a bank account with credit card that will give you some credit history, the fixed rate will undoubtedly be higher than you would find in the US or Canada, often in the range of 10% but even as high as 15%, for mortgages ranging from 10 to 15 years. For more details on this, see our article How To Finance Your Home in Mexico.

Some Mexican banks will offer a much lower interest rate at the beginning of the loan, with a rate that climbs through subsequent years of the loan. The important thing here is to sit down and carefully calculate what the rate will be through the entire life of the mortgage. Also know that Mexican banks do not penalize for early pay off.

 

3. Finance With a Cross-Border Mortgage

A third option is to buy your new home with financing through a cross-border mortgage. One of the more recent trends in home financing in Mexico involves something called a “cross-border mortgage”. In these cases, Mexican banks that are subsidiaries of multinational banks lend US dollars through their US affiliates for the purpose of buying a home. At the same time, more and more US-based mortgage companies are also offering this service.

Typically there are a few conditions attached to this type of financing that relate to the term of the loan, the interest rate and the minimum/maximum loan amount.

For more information on how to buy property in Mexico, join me for a live webinar. 

CBI Mortgages or Cross Border Investment Mortgages

CBI Mortgages or Cross Border Investment Mortgages provides mortgages and services for second homes in Mexico using traditional mortgages with low-interest rates and a flat fee for qualified buyers.  Some real estate investors in Huatulco have used CBI Mortgages without any issues.

 

Current Mortgage Conditions

As we all know, the world economy is going through a period of transition. However, this does not necessarily need to affect your property purchase in Mexico. Most lenders in Mexico are not directly dependent on the US financial markets. So if there is an increase in US interest rates, the interest rates for Mexico remain the same. It is the norm in Mexico that interest rates only change a couple of times per year.

Canadians, Americans and Mexicans can qualify with a minimum down payment of 30% (10% for Mexicans or non-Mexicans with Mexican residency). Current interest rates are between 2 – 4 %. CBI offers mortgages that qualify clients based on having the funds available for the down payment plus closing costs with a minimum property value of $140,000 USD.

If you are interested in pursuing this type of financing, you can get in touch directly with CBI. You can visit their website here.

Usually, this type of mortgage financing can range anywhere from 3 to 30 years, with interest rates that are lower than you would get from a Mexican bank, although usually a bit higher than it would be to finance a mortgage on a home in the US or Canada. Also, an online search for ‘cross-border mortgages’ will return several different options, and it’s worth it to spend the time shopping around if this type of financing appeals to you.

For more information about the other types of financing, read our article here.

It’s an exciting commitment to a decision to take that step and really make that lifestyle change you’ve been talking about for years. Let us know how we can help you find just the right home.