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.

Property Taxes in Mexico

As I mentioned in yesterday's post, what you lose in high closing costs you will make up in extremely low property taxes. Property taxes are .1% of the property value. Many people are attracted to Mexico because of the low cost of living. Property taxes are low because they have never been seen as a source of revenue for the government like in the United States.

Property taxes in Mexico are payable annually. It is common practice in Mexico not to send out property tax bills. You will have to go to your local tax office to ask for the bill.

Does a property tax rate of .1% sound too good to be true? Well, it gets even better. If you are organized and pay your property taxes (impuesto predial) in January, YOU GET A 15% DISCOUNT! If you were paying $400 on a $400,000 property, your taxes would be reduced to $340.

Closing Costs in Mexico, Part 1

Many people who go to purchase a home in Mexico are shocked by the amount of closing costs. Don't let the closing costs scare you! Closing costs are a one-time expense, as opposed to property taxes which are paid annually. The good news is that property taxes (predial) are .1% of the property value.

Imagine that your property is valued at $500,000 USD.

Your property taxes if you lived in California: $5,000 USD/year.
Your property taxes for the same house if you lived in Mexico: $500 USD/year.

As you can see, what you "lose" on closing costs, you quickly make up in property tax savings.
The following is a list of closing cost charges in Mexico:

Foreign Ministry Permit (SRE)

Registration in the Foreign Investments Registry

Trust Set Up Fee (for purchase in the restricted zone)

Trust First Year Fee

Escrow Fee

Notary (notario) Fee

Local Transfer Tax

Registration in the Public Registry Trust

Certificate of Freedom of Liens

Castastral Appraisal

Estimation of Home Value