How does financing work in Cabo?

How does financing work in Cabo? The concept of financing the purchase of Real Estate is so common in Western culture that it is a surprise that in Mexico it is not the norm.

Let’s explore the five most common financing options in Cabo:

Cash

As the saying goes, “Cash is King.” The majority of purchases in Mexico are all-cash. First, you negotiate the price and terms with the seller. Then, you make an initial deposit by wire transfer to escrow. Usually, the escrow company, like Global Escrow Solutions, is located in the United States and the funds remain in a U.S. bank account. Then, after the due diligence period ends, you deposit the non-refundable “earnest money” (usually 20% of the purchase price). As a result, this deposit begins the closing process which is often 45 to 60 days but can vary greatly based on a number of other factors. Finally, once the Notario indicates that the title is ready to transfer, you make the final deposit and the closing takes place. Done and done.

However, if you are reading this, all-cash is not currently possible so please read on.

Seller Financing

When purchasing a re-sale property, one that has been previously owned by a private party, “Seller financing” may be an option like these here. First, a contract is created between you and the seller where the seller acts as the bank. A 40% to 50% down payment is common. Then, you make monthly or quarterly payments over a negotiated term with a balloon payment (remaining balance) due at the end. Moreover, a real estate attorney should be used to protect your interests.

Developer Financing

Some new developments, that are backed by a larger developer, offer their own repayment plan. Unless it is a pre-construction project, where you make payments over the course of a construction timeline until final delivery, these programs are like a traditional mortgage. Rates are fixed and you repay over five, ten, or twenty years. The longer the repayment, the higher the rate. But, not all developers will offer this. In short, bigger developers like Pueblo Bonito, have projects that qualify for this type of financing.

Local Mortgage Lenders

Third-party mortgage lenders in Mexico do exist with traditional fixed-rate loans and terms of one to twenty-five years. Rates typically start at 6% APR. A life insurance policy may be necessary to guarantee the loan. These programs require a commercial appraisal and have other loan origination costs associated with them.

Enter Intercam, my favorite bank in Cabo with branches in both San Jose del Cabo, at Plaza Pescador, and Cabo San Lucas, at the Puerto Paraiso mall. I personally have accounts with them and the service is spectacular. Currency exchange from peso to dollar and vice versa can be done easily by email. Wire transfers to the US are easy and inexpensive. And now, Americans and Canadians can qualify for the “Dream Loan” with terms up to 20 years and very competitive rates to purchase real estate in Cabo.

Terms

• Currency: US Dollar.
• Nationality: USA or Canadian citizens.
• Immigration status: temporary, permanent, or no residency.
• Minimum property value: $250,000 USD.
• Loan-to-value: up to 65% of the appraisal value (risk-adjusted).
• Loan Length: 5 to 25 years (risk-adjusted).
• Variable rate: defined according to credit profile and market conditions.
• Fees: underwriting, closing, and origination.
• Minimum FICO: 700
• Benefits: no pre-payment penalty, interest is calculated on the unpaid balance, a “One-stop” banking experience.

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Global Mortgage (MoXi) offers a secure cross-border financing solution to United States citizens seeking to purchase or refinance residential property in Mexico securely. Security is essential to them and is a core operating principle. 

The company is backed by billions of dollars in capital. Further, it is a regulated and audited financial institution in Mexico. Their team has 200+ years of combined international lending experience on both sides of the border and always has their client’s best interest at hand. Pre-qualify on their website.

Veltra Capital

Founded in 2019 by an experienced team of cross-border lending professionals, Veltra Capital provides mortgage loans to creditworthy U.S. and Canadian citizens for the purchase or refinance of vacation homes in Mexico.

They advance up to 70% of the purchase price for a new home or up to 60% of appraised value for an existing one. The flexible loan products can accelerate a dream purchase or can be used to provide needed liquidity. You can also prepay them at any time without any premium.

Borrow from the US/Canada

Unfortunately, you cannot walk into your local Bank of America and ask for a mortgage application for a house you want to buy in Cabo. Different countries, different rules. You can take a loan out against a property or investment portfolio you have up north and use those funds to buy in Cabo. Sometimes it is best to stick with what you know. This method typically will be less costly and the interest may be tax deductible (contact your CPA). In addition, some of my clients purchase in the name of their company and use business lines of credit. Further, these methods come with the advantage of negotiating your purchase in cash.

Summary

In short, loans are available to finance your Cabo purchase. Don’t let a traditionally “cash-only” market stop you from living your best life. Cabo is about investing in your financial future but it is also about investing in a better you. Above all, you must be open to new ideas. Want to discuss this further or connect with a recommended loan officer? Contact us.