Although many foreign retirees have enough liquidity to buy a retirement home in cash in this corner of the Mexican Pacific, some choose to finance the purchase for one reason or another. And to a greater extent, there are younger people who are still in their working years who rely on the loans offered by banking institutions to achieve their dream of acquiring a property on the beach.
To learn how a foreigner with permanent residence in Mexico, but with income received in the United States can access a mortgage loan, the Vallarta Real Estate Guide editorial team approached Denisse Rodríguez, HSBC mortgage development executive, who explained the process and main features.
“The first thing we need to know is the financial profile of the interested party, that is, if he/she is a salaried, non-salaried or a retired person,” our expert begins. “While salaried employees are people who work in a US company and their income is received via payroll, non-salaried employees are those who receive their income through their own business or company in the United States. Pensioners or retirees are those who receive income from a pension or other retirement accounts.”
Although the minimum age to take advantage of this type of credit is 25 years, the maximum age is 61 years. And loan terms, almost always, are designed to cover up to 20 years. “Usually, the sum of the prospect’s age and the term of the loan should not exceed 80 years. That means that, for example, a 61-year-old person can only be offered a line of credit for five, ten or fifteen years,” says Rodríguez.
Commonly, the minimum amount of these loans starts at 200,000 pesos. “However, depending on the prospect’s debt capacity, the loan can amount to 15, 20 or more million pesos. Basically, the maximum amount that a buyer is awarded is really based on proving his/her financial ability to repay the loan.”
The official documents to be able to demonstrate that a foreigner resides permanently in our country are the passport and the FM4.
Do these loans have a fixed rate? Upon express question, our expert mentioned: “It could be said that, in general, the fixed rate is 8.90 percent. However, when it comes to premier acquisitions, that is, loans over two million pesos, the rate can drop to 8.5 percent. This generally depends on the individual case, the buyers’ financial position and each financial institution’s policies.”
Proof of Income
“In itself, the documents that must be presented to prove income from the United States depend on the employment status of the interested party. While a salaried employee needs his payroll receipts, account statements and his status in the credit bureau, a non-salaried person needs account statements, status in the credit bureau and tax returns to document income,” explains our expert.
For their part, pensioners—or retirees—must present retirement account statements showing that they are receiving pension, retirement and/or social security payments and proper documentation demonstrating retirement status.
Next, the banking institution conducts a thorough analysis to calculate, evaluate and determine the amount of favorable credit that can be granted to the interested party.
Once prospects qualify and submit all their complete and correct documents, the banking institution has up to 48 hours to provide a response. “It is important to mention that, at the time the bank issues the certificate of authorized credit, the term of the loan approval is four months. This means that the client now has that period to be able to make his purchase and deed the property.”
Extra Expenses to Consider
“The main extra expense that must be considered is the appraisal, which is carried out through an impartial technical study by a professional appraisal firm to assess physical characteristics of the property, as well as its use, market analysis and the area in which it is located. These findings are used to obtain a clear and precise estimate of the property’s value.”
Another expense that must be taken into account is the commission for opening the loan, that can sometimes amount to nearly one percent of the total loan. However, our expert adds that sometimes there are promotions through banking institutions or special offers directly from property developers to obtain a discount in this area.
“This type of credit is exclusively oriented to motivate the purchase and sale of residential properties, which can be new and/or resale,” concludes Rodríguez.