Traditionally, foreigners buying property in Mexico had few options other than to pay in full in cash, and the little financing that was available usually required substantial down payments, short terms and very high interest rates. In the past financing for foreigners in Mexico just did not work. From the difficulties in closing escrow in a timely manner, to the more complicated and lengthy process of purchasing real estate here, combined with the—up until a few years ago—vaguely defined process of taking back a property in the event of default, and the fact that the mortgage industry back in the States was doing just fine. There was never any real incentive for a finance company to tackle the market, it had great potential but it was still untested waters. All that has changed in recent years. The US market is slowing down, the process in Mexico is getting more streamlined and accessible and American baby boomers are racing to Mexico in record numbers, for investment, vacation and retirement. With the introduction of financing for foreigners the expectation is that growth in the Mexican real estate market will continue more than ever, the number of American-owned properties is expected to double in the next several years. That has brought an influx of American financing companies into Mexico and with them, more choices for people dreaming of owning property in paradise.
Founded in 1993, Platinum Capital International is a Residential, Commercial & Development Financing firm that has just added Ixtapa-Zihuatanejo to the list of regions they service in Mexico. Platinum Capital was the first company to offer financing for foreigners in Mexico, and is the largest company currently lending to Americans here, with the most loan volume to date by a large margin. As both bank and broker they have unlimited funds, with multiple products and investors to give customers choices. They offer loans that are very similar to loans Americans are accustomed to getting for real estate purchases in the United States, low and competitive interest rates, short or long terms (up to 20 – 30 year terms), without substantial down payments. In perhaps a telling nod to the state of growth in foreign-purchased real estate in Mexico, Platinum Capital was named in the top 10 on Inc. Magazine’s list of Top 500 fastest growing companies.
President of Platinum Capital, J. Gregory Pyeatt, who is now based in Los Cabos, Mexico, has said bringing real estate financing to Americans buying in Mexico had been a dream of his since the mid 1990s, but that he speaks to people every day that are not aware that foreigners could own property in Mexico, finance the purchase and deduct the interest. As the company continues to grow and offer financing in ten markets across Mexico, they are spreading the word.
Since real estate financing in Mexico is relatively new, they offer these tips to potential buyers considering financing for real estate purchases in Mexico:
-Get your financing set before you go house hunting. A pre-approval is vital as it will allow you to negotiate as a cash buyer. Use a company who really knows the Mexican closing process and has a proven track record of accurately approving loans here in Mexico. You don’t want to lose tens of thousands of dollars in deposit money just because your lender didn’t understand the process. (Platinum Capital says their loan process is completely automated and in most cases can get you a decision in 48 hours.)
-Make sure the property you are buying has a clear transferable title. The most common delay in closing is due to a property that was not properly transferred to the original buyer. This happens more often than you would think. Your financing company can help ensure the property changes hands legally.
-Watch out for capital gains! If the seller has not properly registered the home or taken legal possession, you may end up paying their capital gains. And Don’t let anyone try to talk you into recording the sale for less than the amount you agree to pay. This has been a common practice in Mexico but will cost you thousands of dollars in capital gains taxes when you decide to sell
-Experience counts, don’t trust your transaction to just anyone. Buying in Mexico is not the same as buying in the United States—you don’t have the same legal recourse here in Mexico as the United States, but as long as you choose to work with only experienced and reputable firms, the process can go smoothly.
-Originally published in November 2006
