Some Facts
Mexico allows foreigners to obtain direct ownership of property in the country except for property within the 100 km land border zone and 50 km coastal zone. These are restricted zones and foreigners can only own land through a fideicomsio (land trust) by a Mexican Bank. Foreigners do not need to qualify for resident status to own property in Mexico. Ejido, agricultural lands in Mexico still exist and if you are considering buying such land then look in to the legal status of the land with great care. When you buy real estate in Mexico, particularly Ejido land, it is recommended that you purchase title insurance for it.
Real Estate Market in Mexico
Private property sales do take place in Mexico but they are not officially announced. The best way to buy property is through an estate agent. Mexico has a number of small and big real estate agencies with some being run as franchises. Make your decision based on the agent's knowledge about the market and properties that you are interested in. Agent's fees are to be borne by the seller and range between 4-8% of the property value.
Property prices in Mexico are lower than those in most other countries but have witnessed an upswing in recent times. The surge in prices has not been uniformly spread across the country and you could still get a good deal. There is no substitute for research while buying property.
Irrespective of the type of property, ensure that supply of water and electricity is regular, direct and adequate. Do not forget to check on drainage and sewerage facilities.
Solicitors and Notaries
Always hire your own attorney to guide you through the process of buying property. While opting for an attorney check whether he has a cédula professional, which is a registered license to practice law in Mexico. Do not rely on a "free" attorney offered by the seller or estate agent.
The next most important person in your property purchase is the public notary. All Mexican real estate transactions must be certified by a licensed public notary directly by the State Governor. Buyers have the right to choose a public notary for the estate transaction. The notary ensures that all documents and permits are in order, checks on the history of the property while ensuring that it is free from encumbrances like unpaid mortgages and taxes.
Buying Process
The process of buying property in Mexico begins with a verbal agreement on the price of the property in question following which a preliminary agreement of purchase/sale (convenio de compra/venta) must be signed. An initial deposit of 5-10% is paid by the buyer. Foreign buyers must seek permission to buy real estate from the foreign secretary's office and must sign a calvo clause stating that you will not seek foreign jurisdiction for anything to do with your property transaction. The notary looks in to all documents and details relating to the property and the property must be valued.
The buyer and seller must both provide official documents like passport, visa, birth certificates and marriage certificates. The seller has to provide the original property deed, proof of payment of public utility bills and recent tax receipts. Final payment must be made when the property deed is handed over to the buyer at the notary's office. The notary's fees and all other taxes associated with the transaction must be paid at this point.
Costs Likely To Be Incurred
· Local property taxes in Mexico are known as predial and are paid annually. The predial depends on the catastro value of your property and is set by the municipality without any inspection of the property.
· The acquisition tax of about 2% of the sales value depending on the state in which you buy.
· VAT does not apply to residential property sales in Mexico only commercial properties attract VAT.
· Appraisal tax: If the appraisal value exceeds the price paid for the property, you will have to pay 20% on the difference between the two amounts.
· Public notary fees @ 1.5% of the total property value.
· Property survey fees depending on the size and type of property and the complexity of the survey.
· Foreign office permit costs around US$150.
· Service fees for properties within gated communities.
· Title insurance @5% of property value.
· Attorney's fees which must be negotiated right in the beginning.
Mortgages
If you are looking for a Mexican Peso mortgage you will require a FM2 migrant visa. Banks may deal with you if have a non-migrant visa if you can prove your financial ability. Most banks will not finance up to 100% of the property value and mortgage duration is usually 20 years. Interest is usually fixed for the mortgage period and is higher than that on foreign currency mortgages.
Foreign currency mortgages for Mexican estates are available from international banks for a period of 3 to 30 years and are usually restricted to a maximum of 75% of the property value. In many cases banks will require a minimum loan of US$ 100,000.
Irrespective of the type of mortgage, common charges associated include property insurance and fees, commissions, charges for credit scoring, mortgage life insurance and property valuation notary fees. Some mortgage products also attract penalties for early payment. Borrowers must submit proof of their financial reliability like proof of income, credit history, bank references and recent statements in addition to an official identification and your immigration documents (if applicable). In addition, proof of transaction such as a copy of the property deeds, the contract of sale and proof of a down payment will be required.
