Buying Guide – Mexico

Lending criteria

Mortgages are available in USD and will be secured against Mexican residential property.  Mexican mortgages will require full disclosure of income, outgoings and savings.

The maximum loan to value available is normally 70% of the purchase price, or valuation, whichever is the lower.

Mexican lenders assess eligibility on the applicant's capacity to repay the mortgage, as well as recent credit history.  As a guideline, your debt to income ratio should not exceed 35% of your gross monthly income; however there may be a degree of flexibility in this for certain types of applicant.  Mortgage, rent, personal loans and maintenance commitments are all considered as outgoings.  To find out how much you can borrow and for a formal decision in principle, please click on Apply Now.

Types of mortgage

Mortgages can be obtained for the purchase of new or existing properties.  

Renovation and construction loans are available, however estimates will be required at the time of application, and clients must have obtained all the necessary authorisations. Once the mortgage has been approved, funds will be released by the lender directly to your builders following submission of invoices.  The property must be classified as ‘habitable’ before a lender will consider an application for a renovation loan.  In the case of construction loans, more detailed information on the project will be required, so please contact us.

Mortgage products

A variety of products are available. Both interest-only and repayment mortgages can be arranged, on a variable or fixed-rate basis, or a combination of both. Terms can be from 5 to 30 years; however loans must normally be repaid by the age of 70.  Many of our products do not have any early redemption penalties.   For an idea of the rates available please contact us, or for a personalised quotation by clicking on Apply Now.

Documentation you will be required to provide

• Proof of identity (passports, driving licence, or other suitable photo ID.)

• Proof of residence (utility bill, bank statement etc. dated within the last 3 months)

• Proof of income (latest payslip, tax return, copy of accounts etc.)

• Proof of existing mortgage or rent payments (usually covering the last 12 months)

• Proof of deposit (last 60 days bank statements showing source of funds)

• Bank statements (usually last 60 days to show salary credits and outgoings)

• Property details (copy of sales particulars, or sales contract)

Documents will need to be either original or certified copies. Items such as passports and driving licences will need to be in date at the time the mortgage is due to complete or close.

Timeframe

We will issue a decision in principle within 48 hours of receiving a fully completed application. 

The processing time from the application being received by the lender to completion or closing is on average 3 months.

Life assurance

Life assurance is not compulsory in Mexico.  However if you would like to receive a quotation for life cover please contact us and we recommend a provider to organise an illustration for you.

Buildings insurance

This is a compulsory part of the mortgage process, and can normally be taken through the lender or via an approved third party insurance company. This will need to be in place for when the mortgage completes or closes. Please contact us for an illustration.

Bank account

You will need to open a Mexican bank account before completion, from which your mortgage repayments will be debited. This can also be used for utility bills, taxes etc. We can assist you in opening an account.

Payment of your Mexican mortgage

Please be aware that missing a mortgage payment in Mexico may have serious consequences and we therefore strongly advise you arrange for monthly debits from your local bank account. A number of foreign exchange providers offer a renewable 12 month regular payment plan. The exchange rate is fixed at the start of the plan, and the agreed amount will be debited from your local account and sent to your Mexican account each month. This service gives you peace of mind in the knowledge that your mortgage repayments will be met automatically each month. Please contact us to recommend a provider if this is of interest.

Transferring funds to Mexico

Whilst purchasing your Mexican property it is also likely that you will need to transfer funds to Mexico, to pay a reservation fee, a deposit on the property, or to cover additional purchase costs.
Making payments in a foreign currency will mean you are exposed to movements in exchange rates. This is likely to affect the final cost of the property you are buying, as will the exchange rate you receive when you make the transfer. Through our carefully selected foreign exchange provider we are able to not only save money on the exchange rate you receive but reduce your exposure to exchange rate movement. For further information on how these services can benefit you please contact us and we will be able to answer any questions you may have.

Completion

You do not have to be present at completion and can give Power of Attorney if necessary. Your lawyer will be able to discuss this with you in more detail.

Costs of setting up a Mexican mortgage

Bank’s arrangement fee: Typically 1% of the loan amount

Bank’s completion costs: Typically

Valuation fee – will vary according to the purchase price

Legal fees – approximately 1% of the purchase price

Notary fees – your Notaio can provide you with a breakdown of the fees payable on request.

Taxes - If you take out a Mexican mortgage, a further cost will be charged by the Notaio for registering the mortgage deed at the land registry (approximately 1% to 1.5% of the loan amount), acquisition tax 2%, registry fee 1.3%.

Buildings insurance – is payable to provide basic cover for the duration of the mortgage.

We charge a non-refundable application fee of £150.00.  A further fee may be payable on completion of the mortgage.  Please refer to your personalised quotation for confirmation.

Taxes on purchase and resale

Acquisition Tax: This Tax is paid on the sale value of the property and is equivalent to about 2% depending on the State in which you buy. This tax is paid whether the property is sold, transferred, donated, placed into trust, split off or merged.

VAT (Sales Tax): No Value Added Tax (Sales Tax) is payable on residential property. Commercial Property transactions are liable to VAT at the current rate in addition to the Acquisitions Tax.

Appraisal Tax: The Tax Authority may choose to perform a commercial appraisal of the property after you purchase it. If the appraisal value is greater than 10% of the price you paid for it, you will be asked to pay 20% tax on the difference between the two amounts. This sum is due within 15 days of the date of the appraisal report.

Registry Fee: In order to have the Public Records updated, a 1.3% fee (based on the value of the transaction) is paid by the buyer.

Public Notary Fees: You will be required to pay fees for services provided by the Notary Public. These are about 1.5% of the transaction value, plus the cost of the official appraisal (as described in Valuation section, for tax purposes).

Bank Trust: If you purchase property within the 50/100km restricted zones, you will need a bank to set up and manage a trust for you. Shop around, as prices vary from Bank to Bank. Set-up fees can cost around US$1000, with annual service charges between US$1000-$2000. The annual service fee will cover legal obligations (e.g. the filing of necessary documents annually) by the bank on your behalf.

Lawyer / Attorney Fees: If you hire a lawyer / attorney, you will also need to pay him/her with fees for services they undertake on your behalf. These should be negotiated in advance.

Land / Building Surveys: If you need to undertake any land or building surveys, these will have to be paid for separately. Cost will depend on type, extent and complexity of surveys undertaken.

Foreign Office Permit: Your permit from the Mexican foreign office will cost around US$150.

Service Fees: If you are buying a house in a gated community, or an apartment, be sure to check on the annual service fees, and have these put in writing. Service fees can range from US$100 a year to US$1000+ a year, depending on location, number of houses or apartments in the enclosure and amenities offered.

Title Insurance: When you buy property in Mexico, you would do well to consider purchasing Title Insurance. Rates are based on the sale value of the property and are charged at around US$5-US$5.50 per US$1,000 of the value.

Costs and Taxes: Selling

When you sell a property in Mexico, you will be subject to the fees of any professional services you contract, plus the following taxes and fees:

Income Tax on Property Gains: If the home has not been your main residence for at least the last two years, will be required to pay income tax on the property. You may either pay 20% on the gross amount of the transaction, or elect to pay 40% tax on the net profit obtained from the property. This law prevents short-term speculation on the property market. Commercial property is taxed at above rates, regardless.

Agent Fees: If you employ an agent, expect charges of around 4-8% of the value of the sale as a fee, but you may want to negotiate on this beforehand. You will also need to pay IVA (Sales Tax) on agent fees.

Further Information on buying process

The Fideicomiso - In accordance with Mexican law, foreigners cannot acquire direct ownership of residential property 60 miles from the border and 30 miles from the coastline.  This area is known as the restricted zone.

In the restricted zone, however, banks can act as trustees for foreigners interested in purchasing real estate.  The trust is known as the Fedeicomiso.  It works essentially like a trust in the US. The trust has legal ownership of the property and you own the trust. There is an initial fee to set up your trust and an annual maintenance fee.  Generally, the fee to set up this trust is about $550 and annual maintenance fees are about the same.

The seller must cancel the existing trust. To ensure that your transaction is not held up, make sure that the seller has applied to cancel their existing trust.

Title insurance is not required in Mexico, but it is highly recommended, especially for properties not located in larger developments. We work with and recommend Stewart Title. We work very closely with developers and can help you get a discount on title services as well.

Always record the real purchase price of your home. Don't let anyone try to talk you into recording the sale for less than the amount you agree to pay. This has been a common practice in Mexico but will cost you thousands of dollars in capital gains taxes when you decide to sell.

We recommend that you seek professional, legal & tax advice before purchasing in Mexico.

Your home is at risk if you do not keep up repayments on a mortgage or other loan secured on it. Be sure that you can afford the repayments before entering into any credit agreement. Any quotation supplied is not an offer of mortgage and may be subject to a change without notice. Exchange rate movements may increase the Sterling equivalent of your liability under a foreign currency mortgage.