Thursday, August 03, 2006
As more Americans buy homes in Mexico different types of mortgages are being set up...
Buoyed by gains in domestic real estate, Americans have jumped into the worldwide housing market in recent years, buying second homes in far-flung destinations.
Although such purchases are often financed with cash or second mortgages taken out on primary residences, a growing number of citizens are finding help from mortgage cooperatives set up jointly by American and foreign institutions. The deals are slightly more complex than those found in the United States; interest rates and down payments are higher, too. But mortgage executives say these products offer better terms than conventional second mortgages.
Mexico is the most recent example, because it has become a booming market for people looking for beachfront homes. The United States Embassy in Mexico City said neither Mexican nor American government agencies track the number of Americans living in Mexico from year to year. But a spokeswoman said the number had grown since the last Mexican census, in 2000, when 340,000 Americans were counted.
Prices in Mexico are still much lower than in comparable American beach areas, and sites like Los Cabos and Cancún have drawn thousands of American buyers.
Brian Murphy, the president of ConfiCasa Riviera Maya, a brokerage affiliated with ConfiCasa International, based in Houston, said that lenders began offering cross-border loans to Americans about two years ago. “The loans are happening,” he said. “They’re just not the same loans you’ll get in the states.”
For instance, the loans usually require down payments of 30 percent, and most amortize over 20 years and have fixed rates. One exception is a 30-year adjustable mortgage, starting at 7.9 percent (plus a 2 percent origination fee). Buyers can also find 20-year fixed-rate loans at 7.75 percent, if they borrow at least $300,000.
The loan process is similar to its stateside cousin, with appraisals and credit checks. But buyers must register with the Foreign Investment Ministry and will most likely be required to set up a trust, called a fideicomiso, to protect the state’s property rights. Although title insurance is not required, Mr. Murphy recommends it, because laws in different Mexican regions can cloud ownership rights.
Buyers should prepare for longer waits than they are typically subjected to in the United States. “You’re usually looking at a 90-day close,” Mr. Murphy said.
Many people credit General Electric with helping bolster the cross-border mortgage market through a partnership that G.E. Mexico, which finances loans, formed with its WMC Mortgage unit, which underwrites them. (Home buyers looking for brokers authorized to make such loans can check MexicanDreamMortgage.com., a site set up by G.E.)
Given the brisk demand for these loans, it is not surprising that other lenders are poised to join in. Mark Zaltzman, chief financial officer of Hipotecaria Su Casita, one of Mexico’s biggest mortgage lenders, said that it would probably begin lending to Americans for purchases in Mexico by year’s end.
NYTimes: In Mexico, Loans Without Borders