Mexican Real Estate Transactions
Coast Capital Group is excited to bring our 100 years of experience in mortgage lending to help our clients with their Mexican property acquisitions and refinances of properties currently owned in Mexico. Through our partnership with GE Capital Financial Services we are able to offer traditional US mortgages at prevailing rates and terms our clients are accustomed to, that until now, were not available.
A foreigner may acquire rights over real estate in Mexican coastal and border zones through a trust, called Fideicomiso , which is a legal instrument similar to a trust in the United States. Through this trust, real estate is administered by a qualified and licensed bank on behalf of the beneficiary of the trust (the owner). The legal effect of the trust allows the beneficiary to act as the owner of the real estate, and thus, comply with Mexican law. The ownership rights through the trust by the owner are perfected. The beneficiary or owner can rent the property, borrow against the property, and sell the property. Mexican law provides that the original trust term of 50 years may be renewed for additional 50-year periods upon written request by the beneficiary of the trust. When the beneficiary desires, the property may be sold outright or sold subject to an assumption of the existing trust. All proceeds belong to the beneficiary of the trust subject to paying all appropriate taxes.
Coast Capital Group offers financing in most resort locations throughout Mexico. Loan amounts are available up to $5,000,000 with 70% loan to value. We also offer full, light, and stated income documentation lending.
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Please find some helpful definitions and closing costs estimates for your review when considering a purchase in Mexico
• Fideicomiso (Trust Agreement)
• SRE Permit
• RNIE Registration
• Forma Migratoria (Official Residence Permit)
• Notario (Notary)
• Escriura (Title)
• Boleta de cuenta de Agua Individual (Water Bill)
• Evaluacion / Avaluo (Appraisal)
• Libertad de Gravamen (Freedom of Liens)
• Federal Zone
• Closing Costs
Fideicomiso (Trust Agreement)
The trust agreement is created for the benefit of a foreign buyer, executed between a Mexican bank and the seller of property in the restricted zone. Since foreign buyers do not have the capacity to enter into a normal real estate sales contract, due to Constitutional restrictions, the bank acts on their behalf. The bank, as trustee, buys the property for the foreigner and has a fiduciary obligation to follow instructions given by the beneficiary. The beneficiary of the trust retains and enjoys all the rights of ownership while the bank holds title to the property. The foreigner is the beneficiary of the trust and is entitled to use, enjoy and, if he or she should decide to, sell the property held in trust at its market value to any eligible buyer.
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SRE Permit
Secretary for External Relations permit. This is a required permit as you are purchasing a home in Mexico.
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RNIE Registration
Registration for Foreign National Investors permit. This is a required registration to purchase a property in Mexico.
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Forma Migratoria (Official Residence Permit)
The ID issued by the INM for foreign residents. Various types of FM's are used depending on the length of the applicant's presence or status in Mexico. For the purpose of this financing you will in most cases need an FM3.
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Notario (Notary)
A Mexican "Notario" is an official who has been trained and licensed as a lawyer and then, after passing rigorous examinations, commissioned as a public notary. A notary holds high office for life unless he is removed for cause. The Notario fulfills a public function delegated by the government. Although licensed as an attorney, the Notario is not in a position to provide either of the parties with legal advice. The Notario drafts documents, verifies the facts therein and records the documents with the public registry. The Notario's fee generally ranges between 1% and 2% of the value of the asset.
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Escriura (Title)
The title on the property will need to be provided by the seller at the time the loan is closed. If the title is held in a bank trust by the seller, they must fill out a form to cancel the bank trust and release the title.
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Boleta de cuenta de Agua Individual (Water Bill)
A copy of a water bill by the seller must be provided before the loan can be approved. The seller must bring the original water bill to closing and give to the Notario.
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Evaluacion / Avaluo (Appraisal)
When taking out a home loan in Mexico two appraisals must be ordered. The first is to determine the value for the purchase of the property. The second appraisal is called a "Catastral" or Tax Appraisal which is to determine value for tax purposes.
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Libertad de Gravamen (Freedom of Liens)
The regional Notario will issue a freedom of liens to insure clear title.
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Federal Zone
The federal maritime land zone ("la zona federal maritimo terrestre") consists of the first twenty meters of beach-front property. The twenty-meter distance is measured from the high tide line or from the first point above that line where the slope is no more than 30 degrees. Within the federal zone, the government controls water rights and limits vehicles, certain activities and the construction of improvements that could endanger people using the beaches, interfere with free passage or cause pollution. The federal zone is intended to remain public land and to be enjoyed by everyone; however, the Mexican constitution allows the government to grant "concessions" for use of the federal zone.
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Closing Cost
Municipal Fees
Acquisition Tax = 2% of purchase price
Value estimation for property tax = .18% of purchase price
Public Registry Fee = 1% of purchase price
Certificate of Freedom from Liens & Tax Debt = $95
Bank (Trust) Fees
Foreign Affairs Permit & Registration = $1600
Trust Initiation = $550
Bank Trust Fee (also paid annually) = $550
Transaction & Legal Fees
Notario Fee = $2750
Translation Fees = $100
Transaction Fee = $550
Escrow & Title
Escrow Fee = $500
Title Insurance (not required, but recommended) = $1500
Lender Fees
Origination = 2% of loan amount
Underwriting = $400
Docs = $250
Wire = $50
Tax = $100
Administration Fee = $200
Processing = $695
Lender's Appraisal Fee = .1% of purchase price (max $1500)
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