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

Passport Requirements for Mexico

Today I'm going to tackle another confusing issue for Americans traveling to Mexico: passport requirements. Many people have seen the news reports in the past year stating that it is now a requirement for U.S. citizens to have a passport when traveling to Mexico. The news reports caused vacationers to cancel their trips and caused a serious backlog of passport applications in the State Department.

Up until recently, all that was required for travel to Mexico was a birth certificate or a drivers license and a travel visa (obtained at the airport or port of entry). Beginning October 1, 2007, there will be no intercontinental flying without a passport. There is one exception to this rule--U.S. citizens traveling to certain countries, such as Canada, Mexico, the Carribean and Bermuda will be able travel if they can show proof that they have applied for a passport.

As of January 1, 2008, all U.S. citizens traveling by land or sea will be required to present a passport upon their return to the United States.

If you are planning on traveling anytime soon, apply for your passport now! Don't wait!

SPOTLIGHT: Puerto Penasco (Rocky Point)

What up and coming coastal resort town is drawing visitors from all over Arizona and California? It's Puerto Peñasco! Puerto Peñasco, also known as "Rocky Point", is located in the Mexican state of Sonora, about a 3 hour drive from Phoenix. Tourism has been growing steadily over the last few years, but with the recent addition of luxury developments Puerto Peñasco is sure to turn many of these visitors into residents. Also, the addition of the Coastal Highway, which will connect the San Luis Rio Colorado with the port of Guaymas, will attract investors and promote business in the area. In 2008, the city will open its new International airport, making it accesible to visitors from around the world.

Here are links to some of the newest communities in Puerto Peñasco:

Sandy Beach Resorts--luxury condos, gated homes, golf villas, fractional ownership
www.sandybeachresorts.com.mx

Puerta Privada--exclusive, private oceanfront condos
www.puertaprivada.com

Sonoran Resorts--luxury oceanfront condos
www.sonoran-resorts.com

Laguna Shores
www.lagunashoresgcc.com

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).

ICON Vallarta breaks ground!

The long awaited ICON Vallarta development has broken ground. The development is a joint venture between the Chartwell Group and The Related Group. The project, which includes interior design by Yoo by Phillipe Starck, created a buzz by completely selling out its first tower in 3 days. One, two, and three bedroom units range from $200,000 to over $1 million USD. The sleek design of the buildings combined with its prime oceanfront location is sure to attract buyers from all over the world.

To see floorplans, amenities, etc, visit the Icon Vallarta website:
http://www.iconvallarta.com/home.html

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.