While there's more bureaucracy involved in the
trust process, "it is still as good as outright ownership
... and it's a real opportunity for people from the U.S. to
settle in some incredibly beautiful areas such as Puerto Vallarta
and Cancun," says Gomez del Campo. "Prior to 1992,
all you could do was lease."
The Mexican bank trust, which costs about $500 to establish,
is good for 50 years and is easily renewable for another 50
years. Other costs, however, can add up quickly. There's a
mandatory real-estate transfer tax, which averages 2 percent,
a 1-percent to 3-percent fee for a government-appointed "notario
publico" for processing and transaction certification,
plus a bank appraisal fee.
"Buyers just have
to realize that they are going to pay at least 6 percent to
close a deal, as opposed to about 1 to 2 percent in the U.S.,"
said Stewart Title's Creekmore, who teaches classes to real
estate agents on Mexican real estate. "While real estate
deals in Mexico are more expensive ... some of that (extra
money) goes to providing protective benefits to the foreign
buyer. And once you do close, it's a little easier going,
because property taxes are much cheaper and the trust fees
Indeed, property taxes are only about a half
of one percent in the Los Cabos region of Baja California,
says Ted Downward, co-owner of Century 21 Paradise in Los
Cabos. The cost of living in the area, which encompasses Cabos
San Lucas and San Jose del Cabo, is also low and seems to
be dropping as Mexican merchants adjust their prices to compete
with such new-to-the-market American retailers as Costco,
The Century 21 Paradise agent recalls when he
first came to Los Cabos 21 years ago. "There were just
a handful of gringos who lived here. Now, there are tens of
thousands." Property values have risen rapidly and in
many cases have more than tripled in the last half decade,
Downward said. "It's been almost astronomical. I guess
because we were so behind the U.S. for so long, everything
here seems like a bargain."
U.S. lenders can offer much more competitive
mortgage rates to buyers than their Mexican counterparts,
although rates are still slightly higher than what buyers
would pay for American real estate due to the added risks
and extra legal precautions necessary to do business in another
country, say real estate agents.
Cash, not credit, rules
Currently most loans used to buy Mexican property originate
through developers or sellers, who require down payments of
30 percent or more and terms of 7 percent interest or more
on the balance. "These are generally five- to 10-year
loans that require a lot of cash," Downward says. "The
good thing is that if you have the 30 percent, then you instantly
qualify here, regardless of your credit."
In the past, the main obstacle for U.S. lenders
has been Mexico's lax foreclosure laws, which virtually prohibited
them from pursuing homeowners in Mexico who were in default.
"That is changing," says Downward. "The Mexican
government is becoming more reasonable and that is making
it a little easier to foreclose and a little more worth the
Representatives of more than a half-dozen mortgage-lending
companies interested in offering Mexican mortgages from the
U.S. side have talked with Downward recently about opportunities
in the country, he says. "That's a market that is really
going to open up. Lenders are just trying to figure out how
to make it work."
See also: 5
questions to answer when buying Mexican real estate