Ask the Mortage Experts...

With mortgages becoming more of
the norm in Mexico and with everincreasing
loan options, The Tribune
is helping sort through the confusion
by having your personal Financing/
Mortgage questions answered by our
local experts – David Schwendeman
and Terence Reilly, Founder’s of
MEXLend, an industry-leading
Mortgage Broker based in Vallarta.
We invite you to e-mail your questions
regarding buying or financing Real
Estate in Mexico to buyinginmexico@
hotmail.com.
Q: As a Seller, my realtor is pressuring
me to offer owner financing. Why
should I do this if there are mortgages
available? Stan H., Seattle, WA
A: In recognition of a soft market,
some realtors are recommending
owner financing as an option for a
quicker sale. While it makes sense
for some sellers, there are pros and
cons. The most important question you
need to ask yourself is: Do you need
or want the full amount from the sale
as quickly as possible? If the answer
is “yes” then owner financing is not an
avenue you need to embrace. Typically
owner financing requires a hefty down
payment on the part of the buyer and
a short amortization period of 1 to 5
Years. This short amortization period
represents a much higher monthly
payment for the buyer – often 3or 4
times more than that of a 30 Year Loan.
Frequently, buyers – even with the
best of intentions when venturing into
such an agreement – find themselves
unable to continue making such large
payments at some point during the
course of the loan. Consequently, it
is imperative when offering owner
financing, that a seller perform a
rigid cash flow and credit analysis to
determine if the buyer (borrowers) can,
in fact, afford the loan.
With a traditionally mortgaged client,
you will have the entire sales amount
in your pocket at the closing. There are
a myriad of ways to structure owner
financing, but it will still leave you
unpaid for the full amount of the sale,
until which point the final payment
is made. Of course, the realtor will
still receive full commission. Another
drawback for some is that this locks
you into a relationship with your buyer
for a number of years. If there is a non
performance issue or loan default, do
you have the stamina or time to pursue
this legal matter in Mexico?
Also, if your buyer cannot obtain
institutional financing, you might have
to ask yourself “why?” If they cannot
qualify for a traditional mortgage,
is this someone who you want to
enter into a financial relationship?
Mortgages require the vetting of the
buyer’s credit history and their ability
to make payments. Do you have the
tools to vet a potential buyer to the
point that you have a comfort level?
Now, there are some buyers who
fall between the cracks and will not
qualify for a traditional mortgage. For
example: Canadian citizens that earn
their livings outside of Canada. This
is because, unlike the United States,
Canadian tax laws do not require their
citizens to file if they are working in a
foreign country. We ran into this when
we had a Canadian client who worked
in the oil industry in the Middle East.
He had an excellent credit history and
earned more than enough to qualify to
make payments and in addition had vast
reserves of liquid assets. However he
had not filed taxes in Canada, because
he was not required to. The problem is
that traditional Cross Border Lenders
require tax returns as proof of income;
therefore he did not qualify for these
programs. We were very disappointed
in not being able to obtain a mortgage
in this case for an incredibly qualified
client and friend. The seller offered
owner financing and the deal went
forward.
We would be remiss if we did not also
include the upside of owner financing.
First and foremost, is that you have
sold your property. Secondly, you
dictate the terms and most likely are
charging interest on the payments, and
therefore will stand to earn more than
the sales price when compounding
the interest. In the years before
mortgages were available for Mexican
properties, owner financing was more
the norm. These days, with a very few
exceptions, why put yourself in this
position unless you are solvent enough
to take the risk for the small additional
income?
MEXLend, Inc. is a Mexican mortgage
brokerage that currently represents 8
different lenders offering 75 different loan
options in Dollars, Pesos and Euros for
buyers looking to purchase vacation or
investment property throughout Mexico
– including products specifically for
Canadian citizens. In announced results
based upon post-closing client interviews
conducted by Mexico’s largest US lender,
MEXLend won the #1 mark of distinction
for both client satisfaction and fastest
closings for the second straight cycle.
MEXLend can be reached at 322-132-
7991 (in Vallarta), 917-779-9061 (while
in the US or Canada), toll–free in Mexico
by calling 1-800-3-Mi-Casa or go online
at www.mexlend.com (For US and Euro
loans) or www.mexlend.com.mx for Peso
loans.