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 MORTGAGE MATTERS
 by Jim Gorab

MORTAGE MATTERS
by Jim Gorab

Welcome to my new monthly column!  My goal each month is to introduce readers to the mysterious world of offshore mortgaging – or to be exact, the offshore mortgage industry. In this case, we will be zeroing in on the Caribbean Basin and Mexico.

Most of you have probably already been to either the Caribbean, Mexico or Latin America and decided it would be great to buy a piece of heaven. The big question is - What do you do next and how do I get the perfect place to use as an investment – perhaps one that will become the spot where you’ll spend your golden years.

Like anything else, it takes a lot of time and groundwork to finally come up with the perfect place that will fill all of your needs as well as be affordable.  With that in mind, there are several ways to purchase that dream.

1.    Pay cash,
2.    Combine cash and borrowed money from your stocks or retirement accounts (Roth or 401 K for US buyers),
3.    A combination of the above, PLUS - get a mortgage. Yes, a mortgage.

Five years ago several lenders saw an opportunity to make loans on properties outside the U.S. and Canada. Since that time there has been some ups and downs in the offshore or cross border financing industries. Some banks and financial institutions have come and gone, but there is still money available if you know how and where to get it.

Borrowing money is the same outside the country as it is the USA, Canada or Europe. There are key questions to ask about your ability to obtain a mortgage:

1.    What is your credit history?
2.    Do you have the ability to pay for the loan?
3.    Do you have the cash to make at least a 20-30 down payment?
4.    Is the property good collateral?

These are the questions the lender or anybody lending money wants to know the answers to!

Now, here are the base parameters for getting your loan:

•    First, and foremost is your credit - are you a credit worthy person? Minimum credit score of at least 680 is necessary -  the better your score the lower the payment and the better the rate given to you as it lowers the risk of the lender. Any blemishes or late pays on your record and you should start looking for a hotel to stay in.

•    Second,  LIQUID CASH  of at least 25-35 % of your purchase price. This will cover the down payment and some closing costs. For instance, in Mexico the closing costs are 8-10 % of sales price.

•    Third, you MUST have a property that is acceptable to the lender. There are only certain cities and areas that most lenders consider lending on property. Property must have all utilities (water, sewer, and electric) and preferably be on a paved road or in a planned community.

•    Fourth, the property must be completed and be able to get an appraisal for the purchase price and Title insurance. Some lenders will do Construction to Permanent loans, but be careful as there is no guarantee that if the developer takes your money that he is going to finish the building. This has happened a lot in Mexico – part of why that ‘Buyer Beware’ adage originated.

Let’s talk rates…. they vary according to countries and lenders. In Mexico, expect to pay 7.5 to 8.75% depending on your down payment or term of your loan. There are various programs available and check with your lender to find the best program for you.  Rates do not change in Mexico as they would in someplace like the States, so the rate they give you is going to be your rate.  The down side is it takes a long time to get your loan closed - somewhere between 90 and 120 days. So if you want to use your new place for Christmas you’d better get started by Labor Day.

In order to prepare the loan the lender needs your help and co-operation in obtaining the paper work they need. Which brings us to the next point - I would really recommend that you get pre-approved even before you decide to buy. Most lenders will be happy to do this for you. By doing a pre-approval you are not going in blind and know what you can afford. This also helps with your negotiations when purchasing as you can show them that you are pre-approved and able to finish the purchase. 

This should save you money as well. Just like any other loan,  you are going to need two years of tax returns, three months of bank statements, a copy of pay checks, proof of cash or investments, a clear copy of your passport  and a bunch of other papers your lender will require of you in order to make the loan. The best advice during this hassle of paperwork is to be flexible and patient with the process – the end will justify the means!

Now where do you go for these type of mortgages ….I’ve listed some of the companies that I recommend:

1.    A Division of Stewart Title called their Mortgage Alliance Program.  They have offices all over Mexico, Latin America and the Caribbean.
2.    Conficasa Mortgage located in Houston Texas, with several offices in Mexico.
3.    Finance North America, San Diego, CA.

I hope that you’ve enjoyed this inaugural column and if I don’t see you in Paradise at the very least I hope you check back with me next month! 

Columnist : Jim Gorab was in the international money and mortgage business for over 40 years and is now retired and enjoying a life of fishing and golfing. He plans to come out of retirement in the near future to focus his considerable energy on assisting people with the discovery of Mexico.  Stay tuned for more information regarding this in his future columns. 

Email : Jim Gorab

Moving Money Investors and Funding