U.S. financing in Mexico; Is it fact or ficiton?

You may have noticed that recently many web sites and ads have appeared announcing that loans for U.S. citizens desiring to purchase real estate are now available in Mexico. What is behind these ads and is financing really available in Quintana Roo?  In this brief article, I will give you the true facts.

My wife and I have been visiting Playa del Carmen for about eight years.  About two years ago we decided we would like to purchase a retirement home in Playa del Carmen or nearby.  I soon learned that all purchases were cash transactions and that mortgage type financing was not available although there were companies advertising the availability of such loans.  For personal (i.e. three kids in college) and business reasons, a cash purchase was not something I was interested in so we put our dream on hold.  Around the first of the year, new sources of financing started to advertise and what follows are my experiences in pursuing a loan through them.

  Prior to the first of the year, one could find ads for financing purchases in Mexico however most of the ads were simply scams of the worst kind.   I am a lawyer and a banker and yet I fell for a few of the scams.  Websites that promised pre-approvals and “guaranteed’ financing seemed like a no lose situation.  Flashy brochures appeared around town making the same promises.  All I had to do was provide some brief information and an application fee and my dream would come true.  I am ashamed to admit I fell for a couple of the scams but lets face it, purchasing a vacation/ retirement  home can be an emotional experience and lead one to do what they would not normally do.

 Unless you are dealing with a lender or loan broker who can provide references to people who have closed loans through them, do not pay any money until you have an approval letter from a reputable bank or financial institution.  A letter from a loan broker is not enough – get the letter from the bank that will actually be funding the loan.  You should also obtain pre-approval to signing a purchase contract. Loan approval can take months and most purchasers are not willing to wait while you go through the approval process. You could lose your dream home due to the delay or even worse, you could lose your deposit unless your contract was contingent upon obtaining loan approval and funding.

 When applying for a loan, you should first determine whether you are dealing with the financial institution that has the money and will fund the loan or a mortgage broker who does not fund the loan but for a fee, handles the application process for the financial institution.  To the best of my knowledge, there are only two financial institutions offering financing.  They are Collateral International in Birmingham Alabama and G.E Money in Mexico. There are many loan brokers however and while their ads may differ greatly, they are all representing either G.E. or Collateral and they are offering the same loan products with the same terms and conditions.  Most of the brokers that are advertising today are representing G.E.  The key then is to pick a broker that has a demonstrated track record of being professional, responsive, obtaining loan approvals on behalf of clients and actually closing loans.  I have worked with two loan brokers that have impressed me with their professionalism and responsiveness.  They are Conficasa and Mortgages in Mexico.  I believe both now have offices in Playa del Carmen.  I have worked with a few others and one almost caused me to lose a $50,000 deposit due to making promises that the bank did not authorize and had no intention of honoring.

 Each of the two financial institutions I mentioned underwrite loans the same as if you were obtaining a loan in Canada or the U.S...  In some cases, the underwriting is even more conservative due to some concerns about the real estate market in Mexico. You will be required to provide the usual income, debt and employment income.  You will also be required to have a “credit score” that rates you in the top tier of individuals in the country.  If you do not have a sufficient credit score, your loan application will be turned down.  If your score is adequate, the bank will then proceed to underwrite your application.  As a general rule, you will only be able to finance 70% of the purchase price although G.E. does offer 80% financing for one of its loan products (i.e. a peso loan).  The bank will require that the property you want to purchase be completely built and that the developer has obtained what is known as a condo regime.  This rules out “presale” opportunities.  The bank will require that the true sales price be reflected on the title which may cause your seller to incur capital gains tax liability that they might not have otherwise incurred and the bank will require that the property appraise for the sales price.

 In addition to the obvious costs of financing, you will be required to pay a fee to the loan broker for their assistance in processing you loan application.  Get a written statement from the broker as to what this fee will be before paying an application fee.  Generally, the broker’s fee will be a percentage of the loan amount and currently this percentage appears to be around 3%.  In addition to the broker’s fee, you will pay an appraisal fee, processing fees and the closing costs typical for Mexico.  At some point shortly after obtaining loan approval, you should ask for a statement detailing what all of your costs will be based upon your actual loan amount and the value of the property you are purchasing.  Also, be sure to familiarize yourself with the closing costs in Mexico as they are substantially higher than those you would pay in the U.S.

 I have an approved loan from G.E. Money.  I still have not purchased a property and I am in fact giving up on bank financing and am currently looking for a private investor or developer who will finance my purchase.  Why you ask.  Basically, my problem is that I have been unable to locate a property that I like that meets all of the lenders criteria.  This is not due to a lack looking on my part.  I dare say I know the market better than many real estate agents in Playa del Carmen and Puerto Aventuras.  Examples:

Capital Gains Taxes – Several sellers have refused to deal with anyone financing because they do not want to incur capital gains tax liability that they could possibly avoid by selling to a cash purchaser.  Other sellers will sell to someone who is financing but require that the buyer pay the capital gains taxes on top of the sales price.

Presales – All the good deals are presales – right?  Everything is sold during construction – right?  Remember, financing is currently not available for units under construction so that rules out many possibilities.

Appraisals – My experience has been that the appraisers used by the financial institutions are not familiar with Playa del Carmen’s real estate market and as a result, appraisals are coming in low.  If this happens, you can make up the shortfall with your own cash assuming you have any left after paying closing costs and loan fees!

Financing is available to U.S. citizens wishing to purchase real estate in Quinta Roo.  If you are willing to put up with the lengthy application process and you have found a willing seller whose property meets the lending institution’s criteria, you will be able to finance your purchase.  In such a case I would recommend that you contact Eduardo Perez at Conficasa or Amy Tyler at the Playa del Carmen office of Mortgages in Mexico.  So far, financing has just not worked for me, which is why I am now looking for private financing through an individual investor or developer.

I would be more then happy to answer any question you have if you want to contact me at This email address is being protected from spam bots, you need Javascript enabled to view it

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