ASK THE REAL ESTATE EXPERTS

With the phenomenal growth in Real Estate around Banderas Bay the Tribune is helping sort through the confusion by having your personal Real Estate and Financing/Mortgage questions answered by our local experts – David Schwendeman and Terence Reilly, Founder’s of MEXLend, an industry-leading Mortgage Broker based in Vallarta.  We invite you to e-mail your questions regarding buying or financing Real Estate in Mexico to buyinginmexico@hotmail.com.

Q: “How Secure Is a Mortgage for a Mexican Property?”
A: “In short – Extremely Secure!”

When discussing the security of a Mexican Home Loan its important to have a fundamental understanding of the Mexican Real Estate Transaction and how it differs from that of the US or Canada, particularly for foreigners purchasing in Mexico.

There are 2 Mechanisms in place for foreign buyers, which are often misunderstood by people new to the market.  These mechanisms:  The Fideicomiso (Bank Trust) and the due diligence of the Notario (notary) – all play a key role; not only in allowing foreigners the ability to own real property – but in how they enhance the comfort level of foreign ownership.

As discussed in previous columns the Fideicomiso or Trust can be a bone of contention for those unfamiliar with its necessity.  For years, foreign purchasers sought ways of avoiding the Mexican Government’s Mandate on the creation of a Bank Trust for those purchasing the Restricted Zones (areas near the border or along the coast).  However, when financing a property in Mexico, the Trust cannot be avoided; as it’s the Lender’s primary tool in the event of borrower default and foreclosure.  That said, as a foreigner – when you finance a property, you will have a Bank Trust – regardless of whether the property is in a Restricted Zone.  While the creation and maintenance of a Bank Trust does add extra expense – usually $600 to $700 per year depending on the Bank – and it does add an extra level of protection for the Lender; what many buyers don’t understand is that it also helps protect them.  The Lending Bank and Trust Bank perform extensive due diligence in conjunction with the Notario.   Evidence of clear title, correct property registration and legality of sale are all checked and double-checked.  Basically, what this means for a financed purchase – is that a Title or Property Issue which might slip through the cracks on an all cash sale is not likely to happen when a Lender is involved.  Banks are extremely cautious and they insist on knowing exactly what they are lending on.  It only makes sense – they’re funding 70% to 80% of the purchase price.

Just as foreigners financing property in Mexico are required to utilize a Bank Trust, all real estate transactions in Mexico must be researched and signed off on by a licensed Notario.  What many people are surprised to find is that when financing - the Notario assigned to the transaction must be lender approved.  Your lender has done extensive research and due diligence in compiling its list of approved Notarios.  They’ve worked to build relationships with a select group; the best of the best and these relationships serve to protect the financed purchaser even further.  When closing a financed real estate transaction – buyers can be highly secure in knowing that the property is free and clear of encumbrances.

In closing, there is A LOT of information on the Internet.  A recent Google search for “Real Estate in Mexico” listed 9,260,000 entries.  Similarly, a search for “Mexican Mortgages” listed 901,000 entries.  It is undeniable that the Internet plays a key role in the real estate and finance industries.  Something like 80% of all home purchases begin with an Internet web search.  However, it is important to realize that when researching foreign ownership in Mexico that much of the information listed is outdated.  The Mexican mortgage industry is still relatively new and there have been dramatic changes in the past few years.  Interest rates are much lower than they were in the mid-90’s and gone are the days of ARM’s without caps and dual index mortgages.  While an educated consumer is the best customer, it is important to emphasize the need for correct, up-to-date information.  When in doubt, be sure to check the date articles are written.  Anything online written before 2005 is not likely valid in 2008.  As an alternative, you can always feel free to call your local mortgage expert for the most recent rates, terms and policies.

MEXLend, Inc. is a Mexican mortgage brokerage that currently represents 15 different lenders offering 200 different loan options in Dollars and Pesos for buyers looking to purchase vacation or investment property throughout Mexico – including two new products specifically for Canadian citizens!  In recently announced results based upon post-closing client interviews conducted by Mexico’s largest US lender, MEXLend won the #1 mark of distinction for both client satisfaction and fastest closings for the second straight cycle.  MEXLend can be reached at 322-132-7991 (in Vallarta), 917-779-9061 (while in the US or Canada) or go online at www.mexlend.com