Ask the Mortage Experts...

With mortgages becoming more of the norm in Mexico and with ever-increasing 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: What are the different types of loans available in Mexico? Stephanie C., Chicago, IL

A: This question will take a bit more space than what we have this week so part one of the answer is included this week. Look for part two in the June 19 issue with a full description of Home Construction loans in the June 26th issue.

For general purposes, the loans available from a brokerage fall into one of the following categories: Purchase, Refinance, Home Construction, and Commercial. Loans are available for both Vacation Homes and Primary Residences. These loans are available in US Dollars, Mexican Pesos and Euros. The currency of the loan depends upon whether the client is from the US, Canada, Spain, England or Mexico. More importantly, it depends on where the client earns their income and reports their taxes. Residential lending primarily stems from US and Mexican sources, while commercial loans can be funded from many global sources. Mexico continues to enjoy a huge influx of foreign investment.

Purchase Loans for second homes and condos comprise the greatest volume of lending from US banks. You see a home or condo, and decide to buy. The market in Puerto Vallarta and The Banderas Bay Area is just about as exciting as any in the world with a dream home for every taste and budget. In Puerto Vallarta we enjoy the services of well organized and extremely knowledgeable real estate professionals. Our firm is involved with loan closings all over Mexico, and believe me, we appreciate the professionalism of the local real estate community!

A sub-category of the Purchase Loan is the “Pre-Construction Loan.” It is possible to obtain a “Pre-Construction Loan;” however, the lenders will not close and fund such a loan until the project is finished and ALL of the property documentation requirements are
met.

This means that the developer must be amenable to the financing terms. Not all are, but more and more are becoming open to these arrangements so approach your mortgage broker to inquire about a specific project. It makes absolute sense that a lender will not fund until the property legally exists at a value in keeping with the sales price. In Mexico, a property does not legally exist until there is title and tax documentation registered by and with the government. This is a standard that should be kept in mind when venturing into a pre-construction contract. A closing is not a closing until those documents are registered and produced with and by the Mexican government under the auspices of a Notario. The majority of “closings” on pre-construction condos are actually use and occupancy agreements—not legally binding closings that provide true ownership.
Just because you have paid for the property and are using it does not mean that you own it. Financing the property is the surest way to ensure proper documentation and closing procedures. Always consult legal council before signing a pre-construction contract of sale and be fully aware of the risks involved.

Refinancing is an area that we feel will explode in the coming years. As with a purchase loan, all of the property documentation must be in place. When MEXLend launched in 2005 we had very few Banks offering cash-out re-financing loans.

Now most do, with even more lending options on the horizon. Over the years the vast majority of property purchased in Mexico has been on an all-cash basis. Refinancing allows you to take a chunk of that pent-up equity and use it to make more money. That is the bottom line: use your money wisely and make it work for you without having it tied up in one asset. Leveraging is the key to increasing wealth and Mortgage debt is good debt! Spread your risk and increase your wealth.

Most importantly, if you find yourself looking down the road into an asset rich, cash poor situation, start the refinancing process immediately while you can still qualify. Do not wait until your circumstances are dire and you cannot obtain a loan. If rentals on your unit are down and you are having to spend more of your own money to support the property, then by all means take that time to immediately start the loan process before you financials make it impossible.

Unfortunately, many of our Peso loan cash out requests are coming to us as a last resort. This makes it too late. Always plan ahead.
Mortgage interest still remains tax deductable in the US and in Mexico. We cannot say enough about this product. As Martha Stewart would say, “It’s a good thing”.

Look for part two next week.
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.

Ask the Mortage Experts...