One of the first questions expats often ask real estate agents in Mexico is about financing options. While the truth is that there are some financing options available to expats, you need to know about the realities of mortgage lending in Mexico. There are some key differences in financing options north of the border.
What can expatriate borrowers expect?
Without established credit in Mexico, you have no credit score in Mexico. That makes it very difficult to get a loan through Mexican banks. There are some banks that say they offer loans to expats, but the reality is that it is an expensive process with no guarantee of approval. You can expect to jump through many hoops and pay upfront processing fees, and then still be denied a loan.
Another thing you should expect is to have cash to use. Even if you get financing, there are no programs that will lend more than 80% of the home’s value. This means you must have a minimum down payment of 20%. In the United States, you may have heard of many programs that will lend borrowers up to 97% of the value, and even programs that will help you get that 3% down payment. This allows you to buy a home with virtually nothing down. Those types of programs simply do not exist in Mexico, especially for expatriates.
There are several options for expatriate borrowers.
If you don’t have all the cash you need to make your dream home in Mexico a reality, there are a few options:
- You can use funds from the sale, refinance or second mortgage on your home north of the border.
- There are some programs available for expatriate borrowers. They are called cross-border financing. However, the terms, fees and interest rates may be higher than what you are used to in your home country. However, they offer a more traditional mortgage experience.
- Some developers will allow you to make payments during the construction of your home and finance it for up to five years. But these tend to be short-term options while the house is being built.
- There are private lenders in the area that will make short-term loans with the property as collateral to help you realize your dream of homeownership. You can usually expect a balloon payment within 5-10 years.
Which option is the most suitable for you?
Buying and financing a home in Mexico is a very personal decision. Problems and solutions can come in a variety of shapes and sizes. Only you can decide which option is best for you. Dos Expatriados Mexico shared a great video explaining some of the pros and cons we talked about in this post.
For more information on cross-border investors, check out the Moxi Global Mortgage website. You can even enter some basic information to see if you qualify.
If you are wondering what your other living costs might be and what you could afford for a mortgage, check out our post on the cost of housing Mexico. You may find some useful information.
The dream of home ownership in Mexico is not out of reach, even if you don’t have all the necessary cash on hand. You just need to find out about the realities of mortgage loans in Mexico for expatriates before you start.
