• Can a foreigner own property in Mexico?
• How does the Trust arrangement work?
• Is investing in Mexico safe?
• Can I obtain Title Insurance?
• What is the role of a Notary?
• Can I obtain financing in Mexico?
• Can I deduct interest on my property in Mexico?
• How is the loan secured?
• Why use a mortgage broker in Mexico?

Can a foreigner own property in Mexico?

Yes, foreigners can control and own property in Mexico. This ownership is structured through a Trust, in Spanish a “Fideicomiso,” in which the buyer has all rights and benefits as beneficiary. Full use, enjoyment, and financial gain belong exclusively to the beneficiary. The property can be sold at any time at the discretion and direction of the beneficiary.

How does the Trust arrangement work?

The trust is administered by a trustee, usually a Mexican bank. This structure is similar to that of estate planning trusts in the U.S. The initial term is 50 years, and is renewable for another 50 years. The trust can have additional beneficiaries and ownership can be directed in a will and testament.

Background: Mexico has traditionally had concern over foreigners having control of the border and coastline, and therefore has limited ownership in these “restricted areas” to Mexican Nationals. Restricted areas are defined as ~60 miles from the border and ~30 miles from the coastline. The law was changed in 1994 to allow foreigners to possess land and homes in these areas through a Trust or “Fideicomiso.” As a result of this change in the law, demand for beach front property has increased significantly.

Is investing in Mexico safe?

Yes. The legal system differs from the United States, but functions particularly well with respect to property ownership. It is important to work with the appropriate professionals for both the initial purchase contract and title transfer process. Lenders have recently entered the Mexican property financing marketplace which serves as an indication of the overall financial health and safety of the Mexican market and economy.

Can I obtain Title Insurance?

Yes. Title insurance is available from a number of carriers, including Stewart Title, a primary US source of title insurance. Many lenders require title insurance in connection with a loan. While not required in a “cash” transaction, title insurance provides added security in owning property abroad and is recommended.

What is the role of a Notary?

A Notary in Mexico serves a very important role in the transfer of title process. Their function is similar to that of a title agent in the United States. Property ownership in Mexico is similar to many European countries whereby ownership is recorded in national land registry. The Notary makes certain that the title of the property, or in Spanish “Escritura,” and all amounts, including sales price and taxes, are recorded properly in connection with the transfer.

Can I obtain financing in Mexico?

Yes. Until recently, nearly all transactions to acquire property in Mexico were “cash only.” Despite this lack of financing, demand has remained strong and many resort areas have experienced significant valuation growth. Prominent international lending institutions have begun offering mortgage loans in Mexico. This access to leverage has served to increase the demand for property and further increase values. Additionally, competition among lenders has benefited the borrower by lowering rates to those similar in the US.

Can I deduct interest on my property in Mexico?

In most cases, yes. While it is always important to discuss the specifics with a tax advisor, IRS regulation Section 163 (C) indicates that interest on second homes is deductible, even those located abroad.

How is the loan secured?

As mentioned above under “Can I own property?,” title for foreigners is taken in Trust. The lender is listed as primary beneficiary with the borrower as secondary beneficiary. Lender security is based exclusively on the Mexican property without the need for additional collateral.

Why use a mortgage broker in Mexico?

Similar to the U.S., a mortgage broker authorized to do business in Mexico should first of all be familiar with the products available in the marketplace. Second he should identify the appropriate solution and terms for your loan.

Third, and perhaps most important, this agent should efficiently guide your loan through a complex process involving the Seller (oftentimes a developer), the Lender, Notary (for governmental title recording), and Attorney (for contract and Trust formation).

The process of borrowing in Mexico is much different than in the U.S. The legal title transfer, and ultimately funding, takes considerably longer. Furthermore, the complexity of an international property transaction involves various professions and stages, which has many occasion for delays. Our experience and contacts have allowed us manage these transactions much more cost effectively and efficiently.

Call us to understand how we can identify a solution, reduce your borrowing costs, and smoothly manage you international loan.