Securing funds to purchase real estate in Cabo may come as a surprise for those accustomed to the prevalence of financing in Western culture, as the norm in Mexico leans towards all-cash transactions. Here’s a breakdown of the five primary financing avenues in Cabo:
1. Cash Transactions
Indeed, the adage “Cash is King” holds true in the Mexican real estate market, where most property deals are cash-based. The process begins with negotiating terms with the seller, followed by an initial escrow deposit, typically handled by companies like Global Escrow Solutions, ensuring that funds stay in a U.S. bank account. Post the due diligence period, the earnest money (around 20% of the purchase price) secures your commitment and kickstarts the closing process, which varies in duration. The final step involves depositing the remaining balance once the Notario confirms the title transfer readiness. If an all-cash purchase isn’t feasible for you, there are other options to consider.
2. Seller Financing
In scenarios involving re-sale properties, the seller might offer financing. This arrangement involves a contract where the seller essentially becomes the bank, requiring a 40% to 50% down payment. Subsequent payments are scheduled monthly or quarterly, culminating in a balloon payment. It’s advisable to engage a real estate attorney to safeguard your interests in such transactions.
3. Developer Financing
Certain developers, especially for new or under-construction projects, offer bespoke repayment plans. These plans resemble traditional mortgages, with fixed rates and repayment terms ranging from five to twenty years—the longer the term, the higher the rate. Notably, prominent developers like Pueblo Bonito might provide such financing options for their projects.
4. Local Mortgage Lenders
Mexico does have third-party mortgage lenders offering traditional fixed-rate loans, with terms extending from one to twenty-five years and starting rates around 6% APR. These loans often require a life insurance policy for security, a commercial appraisal, and come with additional loan origination fees.
Understanding these options can significantly streamline your property acquisition process in Cabo, whether you’re looking for a vacation home or an investment property.
Discover Intercam, my top banking choice in Cabo, boasting branches in San Jose del Cabo at Plaza Pescador and in Cabo San Lucas at the Puerto Paraiso mall. My personal experience with their accounts has been exceptional. They offer straightforward currency exchanges between pesos and dollars via email and provide simple, cost-effective wire transfers to the US. Notably, Intercam introduces the “Dream Loan” for Americans and Canadians, offering attractive terms of up to 20 years and competitive rates for real estate purchases in Cabo.
- Currency: US Dollar
- Eligibility: Citizens of the USA or Canada
- Immigration Status: Open to individuals with temporary, permanent, or no residency in Mexico
- Property Value Requirement: Minimum of $250,000 USD
- Loan-to-Value Ratio: Financing up to 65% of the property’s appraised value, adjusted for risk
- Loan Duration: Flexible terms ranging from 5 to 25 years, tailored to risk profiles
- Interest Rate: Variable, based on the individual’s credit profile and prevailing market conditions
- Associated Fees: Includes underwriting, closing, and origination fees
- Credit Score Requirement: Minimum FICO score of 700
- Advantages: No penalties for early repayment, interest calculated on the remaining balance, and the convenience of a comprehensive banking experience.
The Dream Loan
Do Americans have access to loans in Cabo? This question frequently surfaces among my clients interested in Cabo’s real estate market, especially given the historical scarcity or high cost of loan options.
Intercam, my preferred banking institution in Cabo, offers a solution. They have convenient locations in San Jose del Cabo at Plaza Pescador and in Cabo San Lucas at the Puerto Paraiso mall. My experience with their accounts has been nothing short of excellent, with seamless currency exchange from pesos to dollars and vice versa, as well as stress-free, cost-effective wire transfers to the US. Notably, they now provide Americans and Canadians with accessible loan options, featuring terms of up to 20 years and competitive rates for purchasing real estate in Cabo.
Mortgage Loan Cabo Terms
- Currency: US Dollar.
- Nationality: USA or Canadian citizens.
- Immigration status: temporary, permanent or no residency.
- Minimum property value: $350,000 USD.
- Loan-to-value: up to 60% of the appraisal value (risk adjusted).
- Loan length: 1 to 20 years (risk adjusted).
- Variable rate: defined according to credit profile and market conditions.
- Fees: underwriting , closing and origination.
- Benefits: no prepayment penalty, interest is calculated on the unpaid balance, some closing costs can be financed.
Global Mortgage (MoXi)
Global Mortgage (MoXi) presents a robust cross-border financing option for United States citizens aiming to purchase or refinance residential properties in Mexico with assured security. Emphasizing safety as a fundamental aspect of their operations, the company is solidly supported by a substantial capital backing, ensuring financial stability and trust.
Operating as a regulated and audited financial entity within Mexico, Global Mortgage brings over 200 years of collective international lending expertise to the table, ensuring that client interests are always prioritized. For those interested, the option to pre-qualify is conveniently available on their website, streamlining the initial steps towards securing your property in Mexico.
Established in 2019 by a seasoned team of experts in cross-border lending, Veltra Capital specializes in providing mortgage loans to eligible U.S. and Canadian citizens. Their focus is to facilitate the acquisition or refinancing of vacation homes in Mexico, offering a streamlined path to property ownership or financial flexibility.
Veltra Capital’s loan offerings are designed to be adaptable, allowing up to 70% financing for new home purchases or 60% for the appraised value of existing properties. Their loan solutions are structured to expedite your dream home purchase or provide the liquidity you need, with the added benefit of no premiums for early repayment.
- Loan Currency: U.S. Dollar
- Initial Investment: Down payment between 30% – 40%
- Loan-to-Value Ratio (LTV): Ranges from 60% to 70%
- Credit Score Requirement: A minimum of 700+
- Debt-to-Income Ratio (DTI): ≤ ~36%
- Interest Rates: Fixed
- Loan Terms: 7-year maturity with 30-year amortization
- Property Use: Specifically for vacation or second homes
- Pre-payment Flexibility: No penalty for early loan repayment
- Age Limit: None
- Insurance Policies: No mandatory life insurance or title insurance requirements
- Loan Management: Full access to a U.S.-based loan servicer, with no requirement for impounds. Taxes, insurance, and HOA fees are self-managed.
Veltra Capital’s approach provides a straightforward, secure financing route for your vacation home in Mexico, prioritizing flexibility and transparency in their loan products.