10 Questions – Mortgages in Mexico

28 Jun

We recently submitted a series of questions to Elaine Duke of Your Mexico Mortgage. Ms. Duke is an expert in the Mexican mortgage field especially for Canadians and Americans looking for a second home or retirement possibilities. Please feel free to contact her with any questions via her website and please tell her were sent you.

Mexico Real Estate Blog (MREB) – What is the latest on the real estate market in Mexico? Is it  recovering?

ED -The last six months indicate that a recovery is certainly  underway in Mexico! We have been busier in the last 6 months than we were all  of last year, and in speaking to clients and developers, it appears that the  general public recognizes that the negative  “Mexico news” is primarily along the border not in  the resort areas.  Those of us that live there and visit there  realise that the perceived dangers in Mexico are also reality in the USA and  Canada. It is my belief that the Americans and  Canadians are realizing the affordability, natural  beauty of Mexico, the warmth of the Mexican   people, the culture, and the lifestyle, as well as the constantly  improving health care programs  and providers make Mexico one of the best  choices globally for retirement living and secondary home investments.   

MREB – Where are the hot spots which you are securing  mortgages in 2010?
 
ED – We are finding all of Mexico to be busy, our  top spots for financing this year have definitely been in  Puerta  Vallarta, Mazatlan, Puerto Penasco, Cancun, Playa del Carmen, Cabo, and La  Paz, however, Ensenada, Mirada and Lake Chapalla also interest the foreign  purchaser.

MREB – Tell us about your company “Your Mexico  Mortgage”?

ED – Your Mexico Mortgage was founded 4 years ago as an  independent mortgage brokerage specializing in mortgages in Mexico, Canada,  and the USA. We work in conjunction with Advanced Mortgages in Mexico which is  headquartered in Dallas Texas, and all of the loan processing is done through  the USA.  We have no affiliations with specific lenders, we are able to  shop the market for the best rates and terms for the clients in all three  countries and are often able to offer financing in Canada and the USA which is  much more attractive in terms of rates and fees than a Mexican mortgage,  dependant on the individual borrower.

MREB – What type of mortgages are  offered for properties in Mexico?

ED – We offer residential mortgages for  existing homes and condos, building lots, construction mortgages, and also  have access to commercial loans. Bank statement loans are also available for  those self employed individuals whose tax  returns may not show sufficient  income for a traditional mortgage.

MREB – What percentage of cash should  be expected to be paid for a property as compared to a loan?

ED – Currently, the  banks in Mexico lend up to 75% of purchase price or appraised value, however  we are able in some cases to add closing costs of 6% to the mortgage which  decreases the amount of required down payment. You can expect a downpayment in  the 25% range. In Canada, we are able to provide up to 90% of the value   of a clients existing home in Canada, in order to free up cash for the  Mexican purchase and similar guidelines are also available in the  USA.

MREB – How are the interest rates comparing to rates in the  U.S./Canada and also to the last couple years. Are they locked in?

ED – Everyone  wants to be Canadian right now!!!! Our rates here in Canada start at 1.80% for  a floating rate variable (floats with the canadian prime rate, currently  2.50%), and cap in the 4.39% range for a five year mortgage.( as of June 9, 2010, subject to change at any time).

In the  USA you can expect rates in the 5% range, and in Mexico the range is much  different the client’s credit score combined with  the down payment affects the interest rate they are granted by the  bank. We are seeing rates in the range of 6.50% up to 8.5% depending on the  term and credit score. The 8.5% range is a locked in mortgage for 30 years,  with the lower interest rates being floating rates. Mexico is a little  different as on the floating rates you are guaranteed this rate for the term (  3 or 5 years) and after that period your rate is reset for the remaining loan  period.  In Mexico the LIBOR (London Index) is used for loan pricing, 

MREB – What additional costs can you expect such as points and  origination fees?

ED – Depending on the lender, they may or may not charge a 1%  origination fee, when we shop and compare lenders this is taken into account  versus the different interest rates offered. You can expect origination fees  to be in the 3% range.  (Do you think you should  mention the additional Mexican fees that range 5-6%?)

MREB – What  does the buyer need to take care of in Mexico concerning their  mortgage?

ED – The most important factor here is to find a reputable company  with a good track record in Mexico. Check testimonials and ensure the company  knows their business in Mexico as it is a very different process than north of  the border. Never pay brokerage fees up front, we get paid when the mortgage  is advanced, other than a nominal fee for credit work, you should not be  required to pay any funds to the mortgage brokerage company until the mortgage  is processed.

Find out if the brokerage company will be with you through  the entire process, we take our clients through the entire process, including  appraisals, permits, notario process, bank trust, and all of the other  processes in Mexico at no additional cost.

Ask for an estimate of costs, we  have seen instances where a mortgage brokerage company will quote you a low  fee, however there may be hidden additional costs such as underwriting fees,  loan processing fees, and numerous other fees that do not form part of the  “low fee” offered up front. Any reputable brokerage company will be able to  present you with a closing cost estimate which will have all of the fees  disclosed on the estimate.
Find out how much you are required to pay to  start the process, and also how fees are disbursed for costs such as  appraisal, notario fees…etc. We use an escrow account which acts as an  independent third party, protecting your funds through disbursements.

MREB  – Is title insurance still readily available?

ED – Yes, title insurance is still  available in Mexico, and dependant on the property you are purchasing, may or  may not be an additional cost that you need to incur. We can help you with any  questions you have regarding title insurance and obtain this coverage if  required.

MREB – Tell us a little about yourself concerning  Mexico?

ED – After travelling to many of the hot spots of the world, I visited  Mexico five years ago for a vacation. Of course I immediately feel in love  with the country, the people, the culture, and all that Mexico has to offer. I  purchased a home in Mazatlan and realized that the process is very different  and foreign compared to what were are used to up north and can be a difficult  process.  I had been a bank manager in Canada for numerous years and  decided at that point that there was a need in Mexico for someone with my  qualifications to assist others through the purchase and mortgaging process. I  continue to travel to Mexico and work out of both Mexico and Vancouver Island.

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