Whether it’s for retirement, for return on investment in a rental property, or simply for getting away during the colder months to enjoy a vacation home on the beach, the Mexican real estate sector is an attractive investment.
If you’re an American or Canadian, you’ll be pleased to learn that you can, indeed purchase a home in Mexico. There are requirements to get your dream come true.
What we should know about buying property in the restricted area.
For real estate transactions with foreigners, there is a restricted zone that includes the strip of 100 km along the land borders and 50 km along the beaches; it is possible for you to buy real estate within the restricted zone. You can do this by setting up a trust or setting up a Mexican corporation. The second applies if there are more than two properties in Mexico, is recommended to take advantage of tax benefits.
Option 1: Open A Bank Trust (fideicomiso)
A trust is authorized by means of a permit used by the Ministry of Foreign Affairs of Mexico (Secretaria de Relaciones Exteriores) and in accordance with article 27 of the Mexican Constitution. It’s important to mention that the properties held in said trust are not assets of the bank, and the size of the bank does not affect the properties that it represents. You don’t have to worry, in the event that the bank that you use encounters financial difficulties, the property you purchased will be transferred to another bank trust.
The trust is initially established for 50 years, and then renewable for another 50 years after that. As the buyer, you’ll be able to use, expand, build and improve the property as you wish during and throughout this time period. You can also rent or sell it and receive 100% of the profits.
Option 2: Establish a Mexican Corporation
As an established Mexican corporation, you’ll be able to buy properties directly in the “restricted” area.
One of the reasons that many people chose option 1 over option 2 is that establishing and maintaining a Mexican company typically turns out to be more expensive in the long run than establishing a trust. Additionally, the New Mexican Company must run operations in accordance with Mexican law.
Do US & CAN Citizens Have Access to Mortgage Loans in Mexico?
In Mexico, financing and credit options are extended to foreigners. You can access these options by purchasing through a bank. A mortgage loan will give you fixed monthly payments.
Types of Financing for Foreigners in Mexico
Foreigners in Mexico can access several types of financing options, including;
1. Traditional Bank Loans: Traditional bank loans are the most common type of financing. These loans require as down payment between 20% / 40% of the purchase price, depending on the lender and the borrower’s creditworthiness. Additionally, the borrower may need to provide additional security such as a mortgage guarantee or a fideicomiso, which is a trust that holds the title to the property. Other costs associated with purchasing real estate in Mexico include closing costs, title insurance, and taxes. Banks typically require collateral and a good credit history. Banks also may require the borrower to provide personal and business financial statements. The process is similar to that of a traditional mortgage in the U.S. or Canada.
2. Business Credit Lines: These lines are secured by the business itself and can be used to fund short-term needs; is repaid by the business, and the interest rate is typically much lower than traditional bank loans.
3. Private Financing: This can be obtained through private lenders, such as individuals or companies, who provide financing to foreign buyers.
4. Using the RRSP retirement fund
It is possible to buy a property in Mexico through a Canadian retirement fund, the process is only 03 steps, and applies exclusively to this market.
5. Seller Financing: Is provided by the seller of the property, who agrees to provide the buyer with a loan to purchase the property.
6. Lease-to-Own: This involves the buyer making monthly payments to the seller, with a portion of each payment going towards the purchase of the property.
7. Mexico Home Financing: Is available through certain banks and lenders in Mexico and can provide the buyer with a loan to purchase the property.