Financing Your Costa Rica Real Estate Purchase at Catalina Cove
You've found the perfect property at Catalina Cove and you’d like to purchase. It could be one of our beachfront condos or maybe you’d like to build your dream home on one of our beautiful 1.25 acre lots. How you are going to pay for it becomes the burning issue.
Historically, buying real estate in Costa Rica has been a cash transaction. Period. You either have the cash or you don't buy.
For many buyers who need financing, the best solution is to pull equity out of a property that you already own back home. This is typically in the form of a line of credit or second mortgage on your home or other investment property.
The nice feature of this form of financing is that there are no income taxes due on money obtained from a line of credit or refinancing. And you can use the funds for whatever purpose you desire. One can usually obtain these funds very quickly from a local bank or other lending institution…oftentimes with just a phone call. In addition, the interest rates and terms are usually very attractive, particularly compared with what we have available in Costa Rica.
And what sort of financing is available in Costa Rica?
At Catalina Cove, we've recently begun working with a new financing program offered by Banco Banex which is being coordinated through Stewart Title. Financing is available to purchase a lot, a condominium or an existing home. Construction financing is also offered if you own the land free and clear. These programs are available to residents of the US, Canada, Puerto Rico, Columbia and the Virgin Islands.
For a house or condo, Banex offers a 20 year adjustable rate mortgage with a 25% down payment requirement (75% LTV) for a wage earner and 30% down payment (70% LTV) for self-employed or non-wage earning borrower.
On land (lot), Banex will loan up to 10 years with a 40% down payment (60% LTV).
At the current time, the interest rate on these loans are prime + 3.5% on homes or condo’s and prime + 4.25% on land. With prime at 6.75%, rates would be 10.25% and 11% respectively. Additionally, Banex is charging 4 points origination fee, a $500 appraisal fee and requires a life insurance policy for the loan amount with Banex as first beneficiary (you can use a US or Canadian policy provider).
There are no pre-payment penalties. Title insurance is available through Stewart Title, however, it is optional.
On the one hand, these are not the greatest of terms, especially when considering the competitive environment which produces great terms in the States and Canada.
On the other hand, if you don’t have sufficient cash to fund a purchase, or sufficient equity in a property at home, this money is available. And US or Canadian banks will not loan money on foreign real estate.
In other words, this is an option to get you invested now in Costa Rican real estate so you can immediately begin to take advantage of price appreciation over time. You can always sell another asset later, and pay off the loan.
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