EXPLANATION OF MEXICAN TAXES AND FEES FOR TRANSFER OF PROPERTY
(These fees are paid whether or not you use a loan to purchase your property)
Closing costs in Mexico are quite a bit higher than in the US or Canada, so they must be considered in addition to your downpayment in determining total funds required to close. We are very good at giving you an accurate estimate of closing costs - no matter where you are purchasing in Mexico Costs vary from State to State. No one likes surprises at closing and the accuracy of our closing cost estimates is one of the things our borrowers most appreciate about doing business with us. Be wary of estimates that may seem low - some brokers may quote lower cost estimates in order to entice you to do business with them. The bottom line is that the Mexico fees are the Mexico fees, and the lender fees are the lender fees, so we strive to give you the most accurate estimate of TOTAL cash required for closing (even including your hazard insurance policy). We are on the low end of any broker fees charged, or we wouldn't still be in business since 2004. Again, we include EVERYTHING in our estimates so there will be no surprises at or before closing.
We have listed some of the standard closing costs you can expect to pay. The amounts will vary according to which State in Mexico your property is located. Loan fees will be in addition to these Mexican fees and taxes. Call or email us with an area and sales price you're interest in and we will be able to send you an accurate estimate of total funds required to purchase your dream home in Mexico.
Permit Foreign Ministry (SRE – Permiso de la Secretaria de Relaciones Exteriores) – This is a permit that the Notario processes through their agents. This is required to obtain your fideicomiso. This is a fixed fee of $10,500 MXP - approximately $1,080 USD.
Registration in Foreign Investments Registry (RNIE – Registro Nacional de Inversiones Extranjeras) – The Trustee has the obligation to process the registration of the Deed (Escritura Publica) within a 30 day period after the granting. This is a flat fee of approximately $300 USDollars (depends on exchange rate)
Trust Set Up Fee – This is a one-time initial fee to set up your Trust (Fedeicomiso). This is required for property purchased in the Restricted Zone (100 km within border or 50 km from the coastline). When purchasing outside the Restricted Zone (i.e. the interior of Mexico), a lender will require a fideicomiso to facilitate the use of a mortgage loan. A fideicomiso outside the Restricted Zone is not required under Mexican Law, but IS be required by all USDollar lenders in Mexico. The trust is a Fedeicomiso en Garantia. This is a one-time charge of approximately $500 USD + IVA (tax of 11%-16% of the fee) so this will usually be $555-$580.
Trust First Year Fee – There is an annual fee charged by the bank to maintain the Fedeicomiso. This is paid in advance, so you have to pay for your first year at closing in addition to your one-time setup fee. Usually your monthly payment will include 1/12 of the annual fee so you will have sufficient money in your escrow account to pay in advance for another year. This is similar to paying for a hazard insurance policy at time of closing and then paying 1/12 of the cost into your escrow account to renew the insurance on the anniversary of your closing.
Escrow Fee – This account is normally set up by your real estate agent when you deposit your earnest money deposit (customarily 10% of the sales price in Mexico). In Mexico, real estate agents are not allowed to maintain an “escrow account” to hold earnest money. A separate escrow account must be set up through a title company. The escrow account is held in a US bank. Funds for the real estate purchase, including remaining downpayment, loan proceeds and closing costs are deposited into the escrow account prior to closing. The escrow money is then disbursed at time of closing based on specific disbursement instructions which are prepared prior to closing. There are certain fees that are paid prior to closing (usually after your loan has been approved) for services provided by 3rd parties (such as the appraisal, Notario deposit, trust permit, trust set up fee). These services must be paid for whether the transaction closes or not, but since they are not collected until you have already been approved, it is low risk money. The escrow account fee is $550-$750 depending on sales price and title company that is used
Notario Fees – These fees are regulated by a fee list authorized by Notario Law, which is valid in every state. These fees can be for a lesser amount, but never for an amount over the fee list. We have negotiated a Notario fee of 1.5% of sales price, not to exceed $2,500 USD throughout most of Mexico (fees are higher in Baja, Cancun/Playa del Carmen and San Miguel de Allende - we give you a good estimate based on our experience in these areas, but we will provide you with an estimate directly from the Notario once your transaction is in process).
Local Transfer Tax (ISAI – Impuestos Sobre Transmision Patrimonnial) – This is equivalent to a state "sales" tax. The Notario Publico is responsible to charge and declare this without surcharges. This tax is usually calculated according to a table, but the Notario is the final determination. The tax usually varies between 2% and 2.5 based on the sales price of your property and the State it is located in.
Registry in RPP (Registro Publico de la Propiedad) – These recordings are processed through the Notario and are based on the sales price of your property for the Trust recording and the loan amount for the mortgage recording. The Notario processes these through the local Registro Publico de la Propiedad in the state you are purchasing in. These fees vary from several hundred dollars to several thousand dollars - again, depending on the State you are purchasing in.
Certificate of Freedom of Liens (Certificados de Libertad o Gravamen) – The Notario has the obligation to check that the subject property has no liens against it. This certificate is good for a period of 30 days, and must be brought up-to-date and re-issued if it expires prior to the closing. A fee will be charged every time a new certificate is issued. This is usually under $100 USD.
Estimation of home value for tax purposes (Avaluo y Deslinde) – This is used exclusively for tax purposes and will not be used by the lender. When applying for a loan, a separate LENDER appraisal will be made by an independent appraiser to determine the value, which will be used by the lender to determine the maximum loan amount the lender will grant.
Contact us to get an estimate of your closing costs based on the sales price and loan amount of the property you are looking to purchase. We also need to know the State in Mexico that you will be purchasing in to give you an accurate estimate of closing costs. Our estimate of closing costs will include Mexico fees listed above as well as all loan fees.
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