the years that I have spent working in real estate in
Costa Rica, the process of securing financing for non-Costa
Rican people has evolved from not being available at all
unless you found it through a private source, to being
available but difficult to process, and then to what we
have now: Mortgage brokerages with highly organized processes
and systems which allow you to shop for the right finance
package to fit your unique needs.
Loans on property in Costa Rica are, of course, not
the same as what we in North America are used to receiving.
The rates are a bit higher, as are the loan origination
You can expect interest rates on your loan(s) to be
from 7.75 percent to around 9.5 percent, depending upon
the type of borrower and the type of loan, i.e., construction
vs. purchase, credit score, etc. You can also find many
different variations of loans such as adjustable rates,
fixed rates, 3 to 5 year loans, and even some loans
which are fixed for twenty and up to thirty years.
In preparing to secure financing on your Costa Rican
property purchase, you will need to organize most or
all of the following documentation:
Agreement (or Earnest Money Contract). A copy of the
Earnest Money check is a good idea, as well.
of the passport(s) and driver's license(s) of the Purchaser(s).
application, completed and signed.
for the past 2 years (wage earner only).
pages of all Liquid Asset account statements for 6 months
(checking, savings, 401K, mutual funds, stocks, etc.)
to prove source of down payment/reserves. 12 months
statements are required for international lenders.
months of pay stub copies (wage earner only).
2 years of tax returns.
you are self-employed or your commission earnings exceed
25 percent of your gross income, you will also need:
Corporate/Partnership tax returns, with all schedules
attached, for the prior 2 years; Profit and Loss Statement
for year to date (signed and dated); and Balance Sheet
for year to date (signed and dated).
Note: If there is any other documentation that would
be helpful in speeding the loan process along, please
supply that information as well. Such information may
include documentation on a Costa Rica corporation (Sociedad
Anonima) if you have one, survey plans, folio real numbers,
construction plans, documented proof of alternative
sources of income including award letters for pension
and/or Social Security, rental income/agreements, etc.
above 8 items are necessary for our mortgage brokers
to begin to process your loan application. After the
loan application process has begun, you will then need
to provide various other documentation, depending on
the type of loan that you have applied for. Some of
these items might be:
Appraisal of the property, done by a bank-approved appraiser.
Appraisals generally run between $400-$800.
insurance: Title insurance is required by some lenders.
The general rule of thumb on the cost of title insurance
in Costa Rica is that title policies range in price
from 0.7 percent to 1.0 percent of the value of the
Insurance: Some lenders in Costa Rica require a life
insurance policy equal to the value of the loan (in
some cases lower than that) and it must be in place
before the loan closes. If you currently have a policy
from your country of origin, that policy can be used
if equal to or over the amount of requested financing,
but the lender would need to be made beneficiary equal
to the loan amount. In the case that you do not have
a life insurance policy and it is required by the lender,
you must request a policy from a provider in your home
country. Sometimes this involves having a medical appointment
and the policy must be underwritten as well. If this
is required, we suggest that it be expedited immediately
to avoid delaying the loan closing. We, of course, will
assist you in this process.
or Hazard Insurance: Home or hazard insurance (one and
the same) must be placed on the home, as it is required
by all lenders. We will assist you in securing this
insurance during the loan process. You can expect this
policy to cost around 0.0026 percent of the property
value per year. For example, if your home in Costa Rica
is worth $100.000, the policy cost per year would be
Taxes: You will need to certify that the municipal taxes
are up to date. This is normally provided by the seller
of the property. Property taxes in Costa Rica run about
0.0025 percent of the value of the property. For example,
if your property is worth $100,000, the property taxes
per year would be around $250.
Closing: To close on your loan, you either need to be
here in Costa Rica to sign the loan documents, or you
will need to provide a power of attorney for it to be
done on your behalf. This power of attorney is more
complicated than the special power that people often
give their Costa Rican attorney in order to close on
a non-financed property in Costa Rica, so we will need
to pay particular attention to this detail during the
loan process. We will be happy to assist you with this.
and Broker Fees: The bank and mortgage broker fees (known
commonly as origination fees) will range between 2.5
percent and 3.5 percent of the loan amount. This may
seem high to those of us who have grown accustomed to
"no points" loans, but I can assure you that
even your "no points" loan had hidden costs.
and Documentation Fees and Stamps: These fees and stamps
range between 2.5 percent and 3.0 percent of the value
of the property. However, and this is a very important
point: If the property you are purchasing is in a Sociedad
Anonima (Costa Rican corporation) and the seller of
the property passes the shares of that corporation to
you at closing, there are no transfer taxes or fees.
We will assist you and the seller in doing this, thus
saving you up to 3.0 percent in fees.
Registration Fee: 0.10 percent to 0.25 percent of the
Fund Management: If the lender requires that the property
be placed into a trust for the life of the loan, there
will be an annual fee of $100-$250. Not all lenders
require this step, however.
Credit Scores: Credit scores must be above 680. We have
access to one lender who will use credit scores down
to 650. If your credit score is not above 680, we have
ways to assist you in boosting your credit score.
(Loan to Value--what you can borrow against the property
purchased) Levels: Home or Construction:
up to 80 percent for Wage Earner
to 75 percent for Self-Employed
to 90 percent for outright purchase on a case-by-case
basis. Restrictions apply.
Only: 60 percent, Wage-Earners and Self-Employed. (We
do have one lender who will lend up to 75 percent on
DTI (Debt to Income) Ratio: 25 percent for housing (up
to 30 percent in some cases), and up to 45 percent total
(housing and other debts).
Fees: These vary from broker to broker. We are constantly
working on the negotiation and organization of these
fees. We advocate that the borrower first run an inexpensive
credit report before actually paying an application
fee in order to avoid this expense if the credit report
comes back showing that the borrower is obviously not
a candidate for a mortgage in Costa Rica.
friends, sorry to be so long-winded this time, but I
have been getting a lot of requests for information
on financing here in Costa Rica, so I thought I would
provide you with all that I know. I am constantly updating
myself in this area and will continue to update you
as always, please feel free to contact me with any questions
that you might have.