Frequently Asked Questions
How does a foreigner own property in Mexico?
Many people have questions about foreign ownership of property in Mexico.
[Taken from Bank Trust (Fideicomiso)]
Article 24, Fraction I of the Political Constitution of the United States of Mexico (Artículo 27, fracción I de la Constitución Política de los Estados Unidos Mexicanos) dictates that foreigners cannot directly own land or water within 50 km (31 miles) of the shore or 100 km (62 miles) of Mexico’s borders*1. Mexico’s constitution was implemented in 1917, so the restricted zone was employed to protect against military attacks.
As you can imagine, it was considerably easier to come up with an alternative to the constitution, as opposed to an amendment. As a result, after 1970, the Bank Trust (Fideicomiso) system was implemented. A permit from the Secretary of Exterior Relations (SRE for its acronym in Spanish) is issued which allows the establishment of the individual bank trust.
The trust grants to the beneficiary (the buyer) to use, modify, borrow against, rent or sell the property at his/ her discretion. This is not a lease and your property is not considered an asset of the trustee bank*2.
The trust also provides estate planning. The buyer is the beneficiary to the trust, and the substitute beneficiary is the person who inherits the property in case of the beneficiary’s death. The substitute beneficiary can be modified, and the trust would supersede a will in your home country.
*1http://www.sre.gob.mx/index.php/permiso-para-constituir-fideicomiso-en-zona-restringida
*2http://html.rincondelvago.com/contrato-de-fideicomiso.html
Why is there a difference in closing costs between Mexico and US/ CND?
[Taken from Closing Costs]
When Cross Border Investment discusses closing costs, we refer to all the costs required to complete the corresponding real estate transaction – these include financing fees, Notario fees, and taxes.
Closing costs in Mexico can sometimes come as a surprise to some buyers. The closing costs are generally paid by the buyer, and the seller is usually responsible for the realtor’s commissions and capital gains, as applicable. Closing costs should be considered, as you will need to have the down payment, closing costs and perhaps mortgage payment reserves available.
The basic theory to Mexican closing costs is that the fees to purchase a property can be seen as comparatively expensive, but the costs of maintaining the property are significantly low. It is generally said that for every $100,000 USD of property value, you pay $100 USD in annual property tax. So, for a property worth $400,000 USD, you will pay approximately $400 USD per year in property tax. Surely, you cannot expect that in the US or Canada!
Please contact your loan officer at CBI for a customized estimate based on your purchase price and loan amount.
What is the difference between a mortgage broker in Mexico and one in US/ CND?
[Taken from Mortgage Broker]
The job of a mortgage broker in the US and Canada is usually to match the borrower with the best mortgage product for which he can qualify. The broker analyzes your credit history, income and asset verification, as well as other factors required for qualification. The broker gathers all the documents required, completes the loan application and submits to the lender for approval. In the US and Canada, when the borrower receives his approval, generally the closing agent (lawyer) assumes responsibility and processes the permits, certificates and deed.
In Mexico, the Notario acts as the closing agent, however, a good mortgage broker is involved in coordinating the closing. Foreigners purchasing property in Mexico with a mortgage represent a small percentage of total national real estate transactions. As such, your mortgage broker should have the necessary experience to share his specialized expertise, and should be involved with you from the very first email or telephone call up until the deed is signed. Your mortgage broker acts as the intermediary between all entities involved, and assists to assure that all permits, certificates and appraisals are ordered correctly and in a timely fashion. Cross Border Investment maintains the lines of communication open, enabling a more timely and secure transaction. To find out any aspect of your purchase and loan – from the status of your approval, to permits, appraisals, and the deed – you just need to speak with your loan officer at CBI.
For tips on how to choose a mortgage broker, please click here
Can I have the same expectations about acquiring a mortgage in Mexico as I do about acquiring a mortgage in the US/ or CND?
This answer is rather dependent on when your last property purchase and mortgage experiences were. As of 2008, many of the rules and processes relating to mortgages have been modified in the US and Canada.
Purchasing real estate in Mexico and the mortgage process mirrors that of what you would expect in your home country. However, you should understand that there are differences in the process which your loan officer at CBI will be happy to discuss with you. It would be ideal to use the framework you have from purchasing properties with a mortgage in other countries coupled with an open mind to the processes used in Mexico. CBI invites you to review the mortgage process in Mexico chart for a more clear understanding.
What is a prequalification?
There are three types of prequalification:
You can submit your information via the prequalify page or your can have a conversation with your CBI loan officer over the telephone to provide the most vital information. The loan officer should be able to give you an idea about loan amounts, interest rates, monthly payments, etc.
The unverified prequalification should be completed at the very beginning of the process to provide you with more specific information, and to allow the CBI loan officer to match you with the best loan program.
The loan officer at CBI will request verification of income (usually tax returns and/ or bank statements) and your credit report. Your loan officer will review this documentation, and provide you with examples of loan amounts, interest rates, monthly payments, etc. This analysis is not a loan commitment by a lender.
This is an ideal prequalification for those buyers who are just starting their property search. It provides specific information, but does not require as much paperwork as the bank/ lender prequalification.
This prequalification is sometimes referred to as a lender/ bank conditional loan approval. CBI has received all the necessary documents to qualify you, and your loan file has been approved by the lender. You are in a position to begin the closing process with the Notario.
This prequalification is for clients who have signed a sales contract and are committed to purchasing a property, or clients who are confident they are going to purchase a property but have not signed a sales contract yet.
Can I get a loan approval, even if I have not chosen a property yet?
Yes. It is highly recommended to obtain your loan approval as early as possible.
Can I get a loan approval, even if the property I am purchasing will not be ready for 1+ years?
Yes. It is highly recommended to obtain your loan approval as early as possible.
What do I need to start?
You need to first contact a loan officer at CBI, or fill out the prequalify form. Having a good idea about your income, monthly payments and credit score will be helpful. Your CBI loan officer will explain the process, and do an unverified prequalification. He will then be able to send you the corresponding documentation checklist so you can work towards a broker prequalification and/ or a bank/ lender prequalification.
What do I need for the process?
You should first contact CBI whose job is to match you with the best loan program for your needs. After you complete an unverified prequalification with your loan officer, he will then send you the corresponding documentation checklist for the best loan program. You will then forward the documents to your CBI loan officer, and he will fill out the various applications and disclosures needed for submission to a lender.
Why choose Cross Border Investment?
Choosing the mortgage broker you work with to obtain your mortgage and to coordinate the closing is a decision you should take seriously. Aside from wanting the best deal available, you need to have confidence in your loan officer since you are going to be working closely with this person for a minimum 2 months. At Cross Border Investment we are committed to providing a superior level of customer service. We understand that the majority of our clients are not physically in Mexico throughout most of the process and that there can be sources of anxiety including distance, language barrier and variations in the processes. We see it as our duty and responsibility to take as much of the worry out of the transaction as possible and to stream-line the process. CBI has significant experience in the industry, and has built strong relationships with the lenders, trust banks, Notarios realtors and developers. We are 100% bi-lingual, located in Mexico year-round, and do all of our processing in Mexico – whereas much of the competition sporadically visits Mexico and outsources their processing. CBI’s only business is mortgages for Mexican properties – allowing us to focus on what matters most to you. CBI was founded on the basis of providing premium service at fair prices.
For further information, please see the following links:
Mortgage broker
Cross Border Investment
Choosing a Mortgage Broker
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