Mexican Mortgage Terms

Shopping for a loan for a new property in Mexico? One of the most common questions is "What are the terms?" The simple answer is: terms vary. The terms of the loan, just like loans in the US, largely depend on your credit score, the down payment amount, and what type of loan you choose. The better your credit score, the better interest rate you will get.

To see the latest daily rates, please visit our website at www.mexquestmortgage.com

What is LTV?

When shopping for a loan, you will probably hear a number of acronyms and terms that are foreign to you. One of the most commonly used loan terms is LTV, or loan-to-value. So, what is LTV?

The loan to value ratio is a measurement of risk. Underwriters will look at the mortgage amount divided by the appraised value of the property to arrive at the LTV. The higher the LTV ratio, the greater the risk of the loan. Customers with a high LTV who are approved may be required to purchase mortgage insurance or pay extra points.

FORMULA

LTV Ratio = Loan Amount/Appraised Value of the Property

Cash Only Society - No more!

In the past, buying property was a cash only deal. If you wanted a $300,000 home, you had to come up with $300,000 in cold, hard cash. While it did make things easier for the seller, it kept many buyers out of the market.

The entry of cross border loans has greatly changed the real estate market in Mexico. Now, developers are offering their own financing, mortgage brokers are providing loans from several different lenders, and Mexican banks have even started offering loans to foreigners.

Many people still are not aware of all of the financing options that exist. They say it is still a "cash only society". Those days have come to an end!

Loans in Mexico and the Mortgage Meltdown in the US

When you turn on the news or pick up a newspaper these days, it is common to see headlines like "Mortgage Meltdown" or "Subprime Crisis". Foreclosures are at record highs and many people are close to losing their homes. In this post, I will explain what this means to Mexico.

Loans for Mexican properties are not "subprime loans"
Up until a few months ago, consumers were able to buy property in the US with no money down (100% financing) and no documentation of assets/employment verification. This meant that people were getting in way over their heads because they were getting approved for large amounts of money that they did not have the ability to pay back. Loans in Mexico do not fall into the subprime category. Documentation is required as well as a good to excellent credit score.

Property values in most areas of Mexico are appreciating
Mexico has been experiencing a boom for the past few years, and continues to see appreciation in resort areas. Unlike the US, prices are not dropping by 20% or 30%. Resort areas are seeing an increased number of baby boomers buying 2nd homes or primary residences.

Strong Canadian currency
The Canadian economy is stronger than ever. It reached parity with the US Dollar last month and today it has surpassed the US Dollar. Canadians have more purchasing power and many are choosing to buy in Mexico.

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.

Secondary Mortgage Market in Mexico

Last week I explained in a post that the main reason that interest rates are higher for home purchases in Mexico was because mortgages in Mexico are a fairly new product and the second mortgage market has not been fully developed.

In October, HSBC became the first non-government issuer to sell mortgage backed bonds in Mexico to the tune of 3.5 billion pesos ($321 million USD). This is a huge development in Mexico's mortgage market and other banks are sure to follow suit.

To read more about HSBC and the secondary mortgage market:
HSBC article

The difference in interest rates between loans in the U.S. and Mexico

If you've ever looked into obtaining financing for a home in Mexico, you will notice that the interest rates for home loans are slightly higher than in the U.S.. There are a few reasons behind this.

The primary reason that the interest rates are higher for loans in Mexico is that there has been no competition in the secondary mortgage markets in order or in the capital markets to purchase these loans.

Financing in Mexico for U.S. citizens began in 2005, when GE Money introduced its "Mexican Dream Mortgage" product. The product was created out of a growing need to provide financing for baby boomers who where looking to buy property abroad.

Since the product is still in its infancy, the market is still changing. Once the loans become more more marketable in the secondary mortgage markets, financial analysts say we will see a drop in interest rates, making them comparable to the rates we would see in the U.S.

It is only a matter of time before we see this happen, as GE Money expects dollar mortgages to surge in 2008.

Currency exchange services - HiFx

So, you've decided to pack up everything and move to Mexico. You've got things to pack, friends to say goodbye to, paperwork to organize, and a number of other things waying on your mind. Moving to a foreign country can be a stressful process and many people overlook one of the most important issues: the exchange rate.

Whether you are an expat sent abroad to work with a large compensation package, or a retiree seeking a new life in Mexico while living on a fixed income, protecting yourself against fluctations in the exchange rate can result in big savings for you and your family.

HiFx, a currency exchange service, can help you with the purchase of a home abroad, fixed international mortgage payments, international relocation, complex international business transactions, and other money transfers.

Why choose HiFx?
Better exchange rates than your bank
Simple, jargon free advice
30,000 customers a year & growing
Fix rates for up to 2 years
Fast, highly secure services

I highly recommend contacting HiFx to find out more about how they can facilitate the currency exchange process. Visit their website at http://www.hifx.com/ for more information.

Developer and Construction Loans Available in Mexico

MexQuest Mortgage offers developer and construction loans in Mexico!
Are you dreaming of building your new home in one of Mexico's booming resort towns? Let us help you acheive your dream with our construction loan. Our knowledgable representatives will guide you through the loan process and be there for you every step of the way

DEVELOPER LOANS

MexQuest can consummate any number of transactions, including mortgage loans ranging from 5 million to 500 million dollars for multi-family, office, retail, industrial, hotel, mixed-use, and self-storage properties. Our consortium, or "pool", consists of banks, non-depository institutions, insurance companies, pension funds, savings and loans, thrifts, and private investors. We offer many major loan programs, including fixed rate, floating rate, mezzanine, bridge, acquisition, and construction funding.

Loan amounts 5 million to 500 million dollars

6 month adjustable, 2, 3, 7, 10, and full term fixed programs

Your choice of 10, 15, 20, 25, and 30 year amortization schedules

Interest only options are available

Loans are available in Mexico

Closing typically is 60 to 90 days

Maximum LTV is 80% and 90% CLTV for construction

Loans in Mexico - Financing by MexQuest Mortgage

MexQuest Mortage offers loans to U.S. and Canadian citizens looking to buy property in Mexico. As well as home purchase loans, we also offer construction loans, cash out refinancing, and developer loans. There is no cost to pre-qualify!

Primary Residences & 2nd Homes

Loans $100,000 to $5,000,000 USD (Higher loan amounts subject to additional approval.)

Up to 80% Loan-to-Value

Minimum Middle FICO Credit Score 680

Up to 55% Debt-to-Income Ratio

45 to 60 Day Escrow

U.S. Escrow Company (First American Title or Stewart Title International)

Financing for US and Canadian citizens in Mexico is a relatively new concept. Due to the boom that Mexico is currently experiencing, there are a number of mortgage companies entering the market. So…why should you choose MexQuest Mortgage?

Focused: We only offer financing in Mexico
Knowledgeable: All of our loan consultants are licensed by the DRE
Ethical: No “bait and switch” tactics
Streamlined processes: Faster closings
Constant communication: All e-mails and phone calls will be responded to in a timely manner
Bilingual staff: Our staff is bilingual and has a solid understanding of the home buying process in Mexico

Contact me today to find out more about our loan programs!
elizabeth@mexquestmortgage.com

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.

GE Money's Mexican Unit Expects Dollar-Based Mortgages to Surge

By Valerie Rota

Aug. 28 (Bloomberg) -- GE Money, the financing arm of General Electric Co., expects mortgage loans to U.S. citizens buying homes in Mexico to almost double by 2008 as more baby boomers cross the border to spend their retirement years. Dollar-based mortgage loans will climb to $95 million in 2008 from $53 million in 2006, said Edwin Vega, head of GE's home lending unit in Mexico City. The company expects to lend out $70 million in mortgages to U.S. citizens this year, he said.

GE Money created the dollar-based mortgage market for Americans in Mexico in 2005 to tap into the wave of retirees moving to the Latin American country. Beach-front properties that cost a fraction of what they would in California, Nevada or Florida are luring baby boomers to Mexico. ``The demographics tell us we're on the cusp of a big expansion,'' Vega, 40, said in an Aug. 22 telephone interview.

GE Money began to offer its Mexican Dream Mortgage product after noticing that baby boomers -- who were born from 1946 to 1964 -- were dipping into life-long savings to buy properties in Mexico because banks failed to provide financing for them. The company offers Americans 30-year mortgages in dollars.

The average loan size is $350,000, covering about two-thirds of the average home price of $500,000, Vega said. The median price of a house in Newport Beach, California, by comparison, is $1.6 million, according the California Association of Realtors. U.S. buyers are flocking to places such as Loreto and Los Cabos in the state of Baja California Sur, Rocky Point in Sonora and Yucatan's Mayan Riviera, Vega said.

The Next Property Hot Spots

New developments in Mexico and Latin America are springing up everyday.
In a recent article, Newsweek interviewed the CEO of The Related Group, Jorge Pérez, to get his thoughts on the next property hot spots.

"Does your foray into Latin America reflect a belief that the U.S. market is maxed out?"

"It has something to do with it. In a couple of years Miami produced more condominiums than in the last 10. So we looked at Baja, Cancún, Acapulco, Zihuatanejo, Panama, Costa Rica. You find you could get branded properties at a fraction of what you could get in the United States, and as long as those places were safe and relatively stable, we felt that there would be a shift in demand to those locations. That’s where we made our bets. I’ve been plotting doing things in Latin America for at least three years, and places like Puerto Vallarta, Cabo San Lucas and Ensenada are just another natural progression of the American market for second-home ownership and tourism."

To read the entire Newsweek article, please visit:
http://www.msnbc.msn.com/id/18593455/site/newsweek/

Financing in Mexico - FINALLY!

Up until a few years ago, financing a property in Mexico was unheard of. Real estate transactions were cash only, and only a small number of people could afford to purchase property. Thanks to an increased demand, several U.S. mortgage companies are now offering financing to qualified buyers.

Financing programs are available to both U.S. and Canadian citizens. Loans for a dream home purchase are available from $100,000 to $5,000,000 USD (higher upon approval). The process for obtaining a loan for a home purchase in Mexico is very similar to the U.S.. One of the main differences is the escrow time. Escrow can range from 45-60 days, but can be streamlined by the buyer and seller providing all of the necessary paperwork on time. U.S. title companies, such as Stewart Title and First American, are used along with U.S. appraisals.

Make your dream home in Mexico become a reality...contact me with any questions you may have about obtaining a loan or Mexico in general!