Mortgage Matters April 2009

MORTGAGE MATTERS
Money Alert in Mexico
By Jim Gorab

Recently someone asked me a question about if someone is buying a property in Mexico - should they get a loan from a lender the states, in dollars, or should they get a pesos loan from a bank in Mexico. Good Question! If it was me I definitely would go to a bank in Mexico and get a pesos loan. Why? Well, right now the US dollar buys 50 % more pesos. The interest rate maybe a little higher, maybe 8-10 %, versus 7-9% for dollar loan from US lenders or brokers, but it is worth it in my studied opinion.

The other advantage is if people buying always use a broker to purchase the property and he is going to work very hard to get the loan and get the property closed – that’s how he makes his commission. Plus the broker is a local and will assist in getting it expedited – again so they get paid sooner rather than later. This will save the buyer lots of e-mail and calls, but the biggest savings is that the bank will charge little or no points on the loan.

Below is a recent experience my wife and I just had in Mexico.

You can now buy anything in Mexico at 50% off. Sound too good to be true? I just did it. Here is how. In August of 2008 the peso was trading at 10 pesos to the dollar. Last weekend my wife Mary took me to Merida for my Birthday. I walked across the street from our hotel and changed $500 US Dollars and got back 7,750 pesos. Last August I would have received just 5,000 pesos. That is 2,750 more, or 50% more in a six month period. What a deal!

Now you are probably all hearing or reading about the US State Department travel advisory which says it is not safe to go to Mexico. This is really wrong news from what me and others can reports. The advisory should say don’t go to the border towns along the US-Mexico border. Yep – fly right over Nogales, Cuidad Juarez and Tijuana. Head on down to central and south Mexico.

Two months ago Mary and I spent a week in Cozumel, Cancun and Playa Del Carmen. Clean, safe, inexpensive and beautiful are the words to describe that trip. I even caught some fish, a rarity for me.
Mortgage Matters

On the recent trip to Merida we found the people very friendly and the city is gorgeous. Old colonials in downtown give way to contemporary homes in the suburbs and every place and thing is really clean. I now know why Susan Haskins and her husband Dan Presher, who have traveled the world, choose Merida to be their home. We found lots of very nice people along with a Costco, Sam's Club and just about anything else you could want. We rented a car and headed to the beach town of Progreso.

It was a really easy trip heading north out of town and on an 8-lane highway and about thirty minutes later you are looking at the gulf! Great roads, fabulous ride, no problemas.
While in Progreso we decided to look at some property (since the water was cold and the wind was blowing which ended any chance of me getting in some fishing). We met a broker who sells and rents property along what they call the Flamingo Coast.

We looked at several houses right on the beach with 3 to 4 bedrooms and 3 or 4 bathrooms, a pool, a/c, and really nice furniture. These rented for $500 to $900 a week or $2000 to $3000 for the month. In the months of July and August the same homes rent for $4,000 to $7,000 a week to the “elite” looking to escape the heat and hang at the beach.
This area reminded me of the New Jersey Shore.

In Cabo, and several other places in Mexico, these same houses would run five to ten times more money. I saw a really nice house on the beach in San Bruno which is just East of Pregeso. It was for sale st $ 365,000 USD or $3,800,000 Pesos which equates to actually $245,000 USD – so this represents a savings of 30% or $120,000 if you pay in Pesos.

The savings were at every turn we took. At a restaurant we paid 450 pesos for two Margaritas and two really big ice teas, plus a platter for two featuring loads of grilled lobster, shrimp, squid, fish, salad and an assortment of local favorites that we had a hard time finishing. So the total was $30.00 dollars USD - that same meal last August would have cost me $45.00, so again another 50% savings.

The Mexican Government is having to buy Dollars to strengthen their currency. But I think that with the dollar being so strong against a lot of other currencies that now is the time to enjoy Mexico at a 50% discount.

And if you decide to buy check out some of the lenders like Bancocomer and Banconorte as well as some lenders in the U.S that will give you a loan in pesos There is no time like the present to check out these great deals.

Buy in Pesos and get a peso loan and you will be way ahead saving 30- 50 % do it this way. Make sure you get title insurance- I recommend Stewart Title as they have offices all over Mexico. Now, mind you, this is my opinion and as with any major investment the purchaser should consult other financial and legal sources and professionals before making a decision. Always check out advise from any source and don’t let just one author, or broker, be your sole source of information.

However, I just couldn’t wait to pass on our great experience of the past few months in Mexico…it’s a great country full of great deals.

See you next month!