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Capital Gains in Mexico |
Manifesting Your Construction |
Financing in Mexico |
Ownership in Mexico |
The History of Land Ownership in Mexico |
 Snell Real Estate has made it easier than ever before to finance in Mexico. Up until a recent regulation change, individuals interested in purchasing home sites or homes in Mexico had no financing options; they were forced to pay cash. Now, American banks, through their partnership with Snell Real Estate’s finance division, Finance Cabo, have the ability to offer the most competitive rates and financing programs available to Purchasers and Owners in Mexico.
FINANCING IN MEXICO
Finance Cabo offers mortgage financing for the purpose of purchasing, building or refinancing your Mexican home. Our primary goal, aside from funding your loan, is to provide an unmatched level of service and care. Since closing procedures, laws and fees are different in Mexico than in the United States, Snell’s realtors, closing officer and finance director work together throughout the entire process to make sure purchasing your Mexican home is safe, easy and worry-free.
WHICH LENDERS DOES FINANCE CABO WORK WITH?
Snell’s in-house Finance Division exists to help you fund your dream property. With that in mind, we work with a variety of providers that enable us to customize a financing option that is perfect for your purchase. For more information on the options offered by these providers, please contact us today.
WHAT ARE THE BENEFITS OF FINANCING?
Financing offers flexibility. Instead of being forced to pay cash, financing allows Purchasers to put down as little as 20 percent - making higher priced, potentially more appealing homes well within reach.
Also, mortgage interest is tax deductible off of your U.S. tax return. You may deduct the mortgage interest on your home or home site in Mexico. Per IRS Publication 936, mortgage interest paid on primary and secondary homes up to $1,000,000 aggregate is tax deductible. There are no limitations stating that the second home must be located within the United States.
Fact: Finance Cabo has been able to successfully leverage our quality reputation to negotiate premium financing terms that are not available anywhere else in the market. This includes options for the lowest down payments, lower rates and fees and loans with no pre-payment penalties.
WHAT ARE THE REQUIREMENTS FOR OBTAINING A LOAN?
• Must be a U.S. or Canadian Citizen or Permanent Resident alien
• A minimum credit score of 650 with adequate credit depth
• Employed in same line of work for a minimum of two years
WHAT ARE THE MINIMUM AND MAXIMUM LOAN AMOUNTS AVAILABLE?
The minimum amount is $100,000; there is no maximum amount that can be borrowed.
NECESSARY DOCUMENTION
Similar to financing in the U.S., financing your home or home site in Mexico requires your tax returns, pay stubs and/or W-2 forms in order to verify income. Alternative documentation
programs are also available that allow the use of bank statement deposits for verifying income. Or, you can simply state income without providing verification. Note: At minimum, two months of statements on all bank accounts are required.
Fact: Financing in Mexico is a new phenomenon, so standards for qualifying for these loans are stricter than in the United States.
WHERE DO I START?
You begin by pre-qualifying. This can be done quickly and painlessly, over one simple conversation with our finance department. Once it is determined that you qualify for a loan, an application will be completed. At this time your credit will be verified and we will notify you of what specific documentation will be required.
HOW LONG DOES THE FINANCING PROCESS TAKE?
The initial credit approval process takes just 3–7 days from the time you have provided the necessary documentation. Next, an appraisal is ordered by the lender — this takes roughly 2–4 weeks. When the appraisal has been completed and all conditions of the loan satisfied, the closing process begins — this takes anywhere from 60–90 days. Once the municipal tax appraisal and required permits have been received, we will begin the process of drafting your closing documentation, at which time you will be ready to sign and close your loan.
Fact: Financing property in Mexico is different from closing in the United States or Canada, adding a slightly more complicated element to the closing process. The transaction may lengthen the process by as much as 30 days over a cash transaction.
WHY ARE TWO APPRAISALS REQUIRED?
Two appraisals are necessary when financing property in Mexico. The first is a commercial appraisal similar to the one utilized in the U.S. This appraisal establishes fair market value. The second necessary appraisal is the cadastral, or tax appraisal. This is required by the municipality and is obtained in order to validate an accurate property tax base. This appraisal is derived from the cost of construction or land value and location. When it comes time to have your property appraised, Snell will arrange through the chosen lender to send the appraiser out. The Notario will order the cadastral appraisal once the closing process has begun.
DO YOU OFFER FINANCING OTHER THAN FOR PURCHASES?
Yes. You may utilize financing to refinance your existing loan, pull cash out, finance your home site lot, build your dream home or custom construct.
CAN A CORPORATION OR A BUSINESS ENTITY FINANCE IN MEXICO?
Currently financing is reserved for individuals. The loan offered will be solely based on that individual’s credit worthiness. In some cases, however, lenders will allow for the Beneficiary of the bank trust to be an entity other than an individual. Please contact the finance division for more details.
Fact: Whenever there is a change of Beneficiary on the bank trust, this is viewed as an entirely new transfer of property in the eyes of the Mexican government. Whenever a transfer of property takes place, the two percent acquisition tax is imposed, and there is the possibility that capital gains may be owed. For example, let’s say you currently own a home and the Beneficiary on your existing bank trust is in the name of an LLC. If at some point in the future you wish to refinance and put a loan on the property, the lender may mandate that the Beneficiary be changed. This will prompt the payment of a new two percent acquisition tax based on
current value, and capital gains on the difference of current value and original purchase price.
WHAT IS A CASH-OUT REFINANCE TRANSACTION?
A cash-out refinance transaction is a loan by where more than two percent of the loan amount is taken as cashi n hand. For example, if you have an existing loan of $500,000, and obtain a new loan for $750,000, by where the original loan is being paid off, the difference of $250,000 goes directly to you. Note: A refinance loan that is only paying off an existing loan is not considered cash-out. Finance Cabo has a variety of flexible programs to assist with cash-out refinances.
ARE THE INTEREST AND POINTS PAID ON THE LOAN TAX DEDUCTIBLE?
Per IRS regulation, interest paid on primary and secondary residences up to an aggregate one million dollars in loan amount is tax deductible. The IRS regulation does not specify that the home must be located in the United States, and thus it is the opinion of tax consultants that interest paid on a home loan on Mexican property is in fact deductible. Points paid in relation to obtaining a loan for second homes are only deductible over the life of the loan. (Please consult your tax advisor for applicability to your own specific situation.)
FINANCING EXAMPLE
A home priced at $3,000,000 would require a minimum down payment of $750,000. Your monthly payment would be $16,627.
We know it’s your money and your investment — it’s our job
to make sure you are protected.
If you are considering a real estate purchase in Baja, make certain everything is done right. Allow Finance Cabo and Snell Real Estate to put our knowledge and experience to work for you. We are an independent brokerage, assuring our only interest is representing you in a safe, solid and secure real estate transaction.
** Any financing scenarios provided are assuming an acceptable
credit rating and that income and assets can be documented
and are adequate to qualify for the loan. Alternative
programs that do not require income documentation are
available, but may result in higher interest rates and/or
larger down payments.
• As little as 20% down
• Interest rates as low as 6.5%
• No pre-payment penalty options
• Credit score minimum only 650
• Loans from $100,000 with no maximum limit
• Custom construction loans
• Home site loans
* Financing options and program are dependent on specific circumstances and may not apply in combination with another.
WHY SNELL REAL ESTATE?
It’s Simple…
Snell Real Estate is the safest way to buy property in Cabo. Period.
Snell Real Estate only represents properties that can be covered by a U.S. Title Insurance Policy. It is our job to protect you and your investment.
Snell Real Estate exclusively represents the finest developments and master planned communities in all of Baja — including Cabo Del Sol, Palmilla, Playa de la Paz, Punta Ballena, Oasis Palmilla, Espiritu Del Mar and Villas Del Mar.
Snell understands the laws and regulations related to owning property in Mexico. We oversee every closing to ensure everything is done right.
Snell Real Estate pioneered the use of U.S. Third Party Escrow in Los Cabos. Your money remains safe until the property title is transferred to you.
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