AARP has just published an article that will be of interest to all of us in Mexico – they have rated Puerto Vallarta as the #1 place to Retire Abroad. This is excellent news for all of us, since it reflects the amenities and safety of living in Mexico.
Just a brief update on my view of the Mexico real estate market. Thanks to my loyal real estate agents and developers who refer business to us, Mortgages In Mexico continues on a record pace – we are the busiest we have ever been in the nearly 6 years of doing mortgages in Mexico. I appreciate your referrals very much. Although there are overall fewer transactions in Mexico this year than over the last several years, a much greater number of these transactions include mortgage financing. It has taken awhile for mortgage financing to be an easy and viable alternative to purchasing in Mexico, but it looks like mortgage financing is now being accepted by real estate agents, developers, sellers, and buyers as a preferred way to purchase property in Mexico. Financing still has many “gotcha’s” that can “getcha”, so it is important to work with a full-time mortgage broker in Mexico who has experienced many of the potential problems that can come up. There is no substitute for experience in Mexico, and I’m currently the most experienced loan officer in Mexico. More importantly, since none of us can do this business alone, I am most proud of the team of professionals we have assembled who understand the importance of “gringo-style service” that is expected from our Canadian and US buyers. Even if you don’t have a buyer you are currently working with, I encourage you to call me on the phone and let’s get a line of communication and a relationship started that will pay dividends when you DO get a buyer who wants financing. I will be happy to give you an overview of the mortgage process in Mexico and answer any questions you may have. Most of you do not want to become mortgage experts, but you do want to know enough about mortgage lending in Mexico so that you can speak intelligently to your buyer when the subject of mortgage financing comes up. I can give you enough information to look professional and knowledgeable before you refer them to me for the specific details they are interested in. It is a big part of my job to make YOU look good because you referred your buyers to Mortgages In Mexico to do the loan. I have developed some excellent mortgage tools you can use with your buyers which I can share with you when you contact me. Remember, we can do loans on homes, condos, and lots 2,000 m2 or less.
Why are many more Mexico transactions including mortgage financing?
1) It has become more difficult to get an equity loan in the US and Canada – underwriting guidelines are tougher, interest rates are higher, and equity in real estate is much less now than it was 2 years ago.
2) Cash is King – Buyers want to hold on to as much cash as possible. They can do this by leveraging their purchase with a mortgage loan using their Mexico property as the security for the loan. This also protects the remaining equity they DO have in the US and Canada. Their equity represents a ready reserve for emergencies or even other investment opportunities that may arise in this economy.
3) Once cash is invested in a property in Mexico, it is difficult to pull this equity back out again, so it often doesn’t make sense to tie up their cash in real estate in Mexico when they can invest only a small downpayment rather than pay all cash. There are no Home Equity Lines of Credit in Mexico like there is in the US and Canada. The only way to pull cash out of a Mexico property is to sell the property, or get a cash-out refinance from us on their Mexico property. In fact, many of you are referring your previous buyers to me because they are calling you up and asking if they can refinance their existing home in Mexico so they can get some cash. The maximum loan possible is only 50% of the current value, and there are closing costs on top of this, so it is an expensive endeavor, and the result is very little cash can be pulled out. It is better to put less money into the property initially and to keep the cash. If people have a specific maximum payment in mind for Mexico, I can determine the loan amount that represents this payment and they can then put down the required downpayment.
4) Interest rates are at an all-time low in Mexico, and interest IS tax deductible on US taxes. Although interest is not deductible for Canadians, we are still doing a lot of loans for Canadians as their economy continues to out-perform the US economy.
Developers (and real estate agents representing these developments) should also keep in mind that I can work with you to make your development stand out from the others when you offer excellent long-term financing. You can even offer to pay for some or all of the buyer closing costs, which increases your eligible buyer pool significantly. One of the biggest hurdles for potential buyers is a 25% downpayment AND high closing costs. Give me a call and we can discuss this further.
We expect the market to continue to improve as the US economy strengthens and interest rates remain low. 2010 is a record year for us, and we expect 2011 to be even stronger than 2010. Success breeds success, and I want to help you be as successful as possible by increasing your sales using mortgages in Mexico. Look at my website and give me a call – let’s talk!
We have heard rumors of hard times and recession. We have chosen not to participate and our business is booming.
Doug Jones, President (NMLS Lic# 139824)