Title Insurance in Mexico

Although title insurance is not required in order to purchase property in Mexico, it is highly recommended. Many people are under the impression that a fideicomiso (bank trust) will protect their title. This is not true. The fideicomiso acts as a fiduciary, but it does not protect the title. The piece of mind that you will get by knowing that you own your property has a clear title is well worth the price. Even if you do not purchase title insurance when you first purchase your property, you can still purchase a title insurance policy at any time. Title insurance companies may be able to find descrepancies or other issues that your notary or lawyer may not be able to find. If you are going to finance your property in Mexico, a title insurance policy is required by most lenders.

Stewart Title and First American Title both have a strong presence in Mexico and their experts can help you with your title insurance policy. As foreign investment in Mexican real estate becomes more and more common, we can expect to see the entry of other title companies into the Mexican market.

Closing Costs in Mexico, Part 2

In Part 1 of our "Closing Costs in Mexico" post, we went over the differences between closing costs in Mexico and the U.S., as well as the difference in property taxes. Today we are going to explore the third party fees that make up the closing costs.

Foreign Ministry Permit (SRE-Secretaria de Relaciones Exteriores) - This is a fixed cost that the notary must process through their agents.

Registration in Foreign Investments Registry (RNIE) - The trustee is responsible for registering the Deed within 30 days after it has been granted.

Trust Set Up Fee- This is the one time fee to set up your trust (fidecomiso) when buying property located in the restricted zone.

Trust First Year Fee- This is an annual fee charged by the bank in order to maintain your trust (fidecomiso).

Escrow Fee-In Mexico, the earnest money deposit will go into an escrow account held by a title company and money will be disbursed accordingly.

Notary Fees- These fees are regulated by a fee list, but vary from state to state.

Local Transfer Tax (ISAI-Impuestos Sobre Transmision Patrimonial) - This tax is similiar to a sales tax and is calculated by a table. It is usually around 2.5% of the home value.

Registration in Public Registry Trust-The Notary is in charge of processing the sales price of the home and the loan amount through the Public Registry.

Certificate of Freedom of Liens- This fee is to ensure that the property that you are purchasing is free of liens.

Catastral Appraisal- This is the tax appraisal in order to determine the value for tax purposes.

The History Behind Mexico's Restricted Zone

In an earlier post, I had explained the difference between the two categories of land in Mexico--the restricted zone and the interior (non-restricted zone). When asked why the coastal and border zones are restricted, many people don't really know why.

In order to better understand the history behind Mexico's restricted zone, we must go back to the mid 1800's. Mexico and the United States had a very hostile relationship due to the outcome of the Mexican-American war, where the United States took the states of California, Nevada, Utah, and part of Arizona, Colorado, and New Mexico. The biggest blow to Mexico was the loss of Texas in the Treaty of Guadalupe Hidalgo. Mexico lost almost half its territory in the war!

Bilateral relations were strained, and it was only a matter of time before Mexico took a stand against the United States' imperialistic expansion. On February 5th, 1917, revolutionaries met in Queretaro to reform the Mexican Constitution of 1857. One of the most important amendments to the Constitution was Article 27.

"Article 27 of the Constitution declares that the wealth contained in the soil, the subsoil, the waters and seas of Mexico belongs to the Nation. The right to land ownership and to exploit the subsoil may therefore only be granted by the Nation. Land may also be expropriated whenever deemed necessary. " --Source: SEP, Department of Education

The principles of the 1917 Constitution are alive and well in Mexico to this day. So how is it possible that foreigners can now own property in the restricted zones? Mexican President Carlos Salinas, in preparation for the upcoming NAFTA agreement and after receiving pressure from groups in Mexico and the United States agreed to amend Article 27. In 1993, Article 27 was amended to allow foreigners to own property in the restricted zone through a bank trust(fidecomiso).