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The statistics speak for themselves: over a million Americans and Canadians currently living in Mexico; around 70 million baby boomers in the United States set to retire within the decade; a saturated housing market in the warm coastal climates of Florida, Hawaii and California; it all boils down to the fact Mexico is rapidly becoming the prime alternative for U.S. and Canadian retirees to see out their final years.
Suffice to say, being able to buy the same beach front property in Mexico at half the price you would pay for in the United States is a huge and obvious incentive.
Add to that a much lower cost of living, a live-in maid and gardener for around US$800 a month for the pair, breath-taking coastal views and you see why south of the border is the place to be.
So it comes as no surprise as the market grows for foreign buyers in Mexico - according to statistics almost 400,000 foreigners bought retirement or vacation homes in Mexico in 2005 - that home loan companies specifically catering to this niche market have begun to sprout up.
Cross Border Home Loan
The U.S. behemoth General Electric was the first major company to take note of the growing exodus to the south and the potential it held.
They set up a subsidiary called GE Capital/GE Money to offer U.S. denominated loans to foreign buyers backed by Finance North America - a reputable cross border mortgage broker - who helped them set up their initial lending program.
At first, the mortgage packages weren't at all that attractive. Interest rates on a 15-year loan were over 12 percent and you had to secure your loan on a property you already owned in the United States. However, the scenario has changed considerably in the last three years.
Now foreign buyers can obtain 20- to 30-year loans with an interest rate of around seven percent.
They can also secure their loan on the property they're buying in Mexico. GE is currently the most successful cross border loan firm to date by leading the market with the highest number of loans issued in Mexico.
GE home loans are currently issued in the following areas: Ajijic - Chapala, Los Cabos - La Paz Corridor, Mazatlan, Riviera Maya, Puerto Vallarta, Puerto Penasco (Rocky Point), San Felipe, Tijuana - Ensenada Corridor, San Miguel de Allende, Acapulco, Ixtapa.
Another company that has ventured into the market is Conficasa. After a successful stint in providing loans for Mexicans living abroad - primarily in the United States - who wanted to buy property back in their country of origin, Conficasa has recently turned its attention to the cross border market with it's first foreign buyer loan issued in 2005.
The company's edict is to enable a U.S. buyer to purchase property in Mexico and pay off the loan under the traditional U.S. system.
Spanish-owned BBVA and Citibank's Banamex are also jumping onto the bandwagon by offering home loans specifically targeting the foreign buyer market.
As the influx of U.S. and Canadian retirees continues to grow it seems that cross border loans will be an extremely profitable business in the near future and one that's already catching the eye among many banks and mortgage firms on both sides of the border.
Mortgage Loan General Information
The minimum amount of a cross border loan is US$100,000 and can go up to US$5,000,000.
Due to Mexico's complicated and bureaucratic property laws, the importance of having a well-qualified mortgage broker is paramount when buying property in Mexico as is getting title insurance.
According to the IRS, interest on U.S. dollar denominated loans of up to a US$1,000,000 is tax deductible.
Foreigners cannot acquire direct ownership of residential property in Mexico 100 kilometers from the border and 50 kilometers from the coastline. However, the introduction of the Foreign Investment Law allows foreigners to establish a bank trust (or a “fideicomiso”) which allows them to obtain real estate ownership rights within the so-called Restricted Zone. This also includes property intended for industrial or tourism purposes. These rights of ownership mean that foreigners can use, rent or even sell their property as though they directly owned it.
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