If you have not bought your lot yet and want money to finance both the purchase of the lot and the construction of the home
Construction loans are available in Mexico only under specific conditions. The main condition is that the borrower does NOT have title to the property yet. (See below if you already own a lot and would like construction money to build. Basically you will need to build the home with your own resources and then refinance the property at time of completion.) The subdivision that you will be building in must be lender-approved. You would choose a specific model of home to be built on the specific lot you want, and then all of this would be agreed to in a single contract price for both the lot and the home. This is a quite complex transaction, but certainly is do-able. It just requires you to work with a company like Mortgages In Mexico which is experienced in doing these types of transactions.
Construction Loan Details:
• The initial 30% of construction is funded by the developer from the 35% downpayment made to the developer at time of closing.
• The loan proceeds are given in 3 disbursements: the first at 30% of construction, the second at 50% of construction, and the last at 75% of construction.
• The construction budget for each house will be required to be broken down by each phase of construction (30%, 50% 75% through 100% completion).
• The first construction draw will be made when the property is 30% complete. This is when the foundations, first level walls, septic drain excavations, and light connections are finished.
• The second construction draw will be made when the property is 50% complete. This is when the raw structure is finished, and the ducts for the electric wiring installation and the outflows of the sanitary facilities are completed.
• The third construction draw will be made when the property is 75% completed. This is when the house has plaster, kitchen and sanitary facilities, carpentry is beginning, tiles almost finished, metallic structure for ceiling and air outflow are installed, floor is finished and ready for carpet, laminated floor, etc.
• Construction draws are subject to change depending on the specific home to be built
• Construction should be finished within 12 months of the initial construction draw (not the initial groundbreaking).
• Payments will begin when the first construction draw is disbursed. Payments will be based on total money disbursed to date, so monthly payment will increase at each disbursement. If the construction draws are 1/3, 1/3, 1/3 at each disbursement, then the total payment will be 1/3, 2/3, and 3/3. For example, the payment schedule for a $1,200 payment would be $400 per month at first disbursement, $800 per month at second disbursement, and $1,200 when the last disbursement is made through to the end of the fixed portion of the loan. These payments will be considered as the first year of your loan term, so if it takes one year to complete the home, the first year of partial payments will be considered as the first year of the loan term. If, for example you have a 5 year fixed rate, you would have 4 more years remaining.
This option is for both US and Canadian Citizens. The buyers will pick out a home plan, and an appropriate lot. This loan will work with a single contract that will cover both the lot and construction loan. Prior to each construction draw, there will be a “Technical Review” of the property, and upon completion of this review, an additional disbursement will take place. The 3 disbursements occur in basically 1/3, 1/3, 1/3 amounts, but if you can show that additional money is required for purchasing materials or (for example) appliances earlier in the construction, this will be reviewed and disburse based on the money needed. The disbursements occur at 30%, 50% and 75% completion. The home needs to be completed within 12 months from the first disbursement (not from the initial ground breaking).
25 years to 64 years 11 months at time of closing
Life insurance cost $0.43 per $1,000 of loan balance included in payment
For borrowers between 65 and 75 years of age, maximum loan is 50% of value
Hazard Insurance $.0.26 per $1,000 of value of home
Credit score 680 or above
Maximum loan amount $600,000
Minimum loan amount $100,000
Land telephone line required – cell phone is not acceptable
If you have already purchased a lot and want to build on it
If you already own your lot and are looking for money to build your home on your lot, there is no construction money available in Mexico. You would need to build the home from your own resources (an equity loan in your home country or sale of existing assets). Upon completion of the home, you could then do a refinance. Here is an example of how this would work:
Lot price: $100,000
Total invested: $400,000
Value after construction: $500,000 (estimated)
Refinance loan based on $500,000 = $250,000. This pays yourself back for most of the $300,000 that you put into the property for construction costs. For more information, please contact us.
Pre-sale condominium purchase
Currently there is no financing available to make scheduled payments to your developer during the construction of your new condo. However you may be able to purchase a pre-sale condo and use financing. Normally the developer will offer you an option to put 30-35% down and then come up with the balance at transfer of title. When negotiating a contract, be sure to stipulate that your balance due to the builder will occur at time of transfer of title, NOT upon completion of the property. This is very important because the condominium regime (regimin de condominio) must be approved AND recorded before title can be transferred. Normally the condo will be completed before the condo regime is approved and recorded. Title cannot be transferred until the condo regime is approved and recorded, and a lender will not close on a loan until title can be transferred to you and a mortgage lien can be placed on your property.
If your contract stipulates that your final payment is due to the builder at time of completion, you may have to forfeit your deposit you have already made if you can't comply. You would not be able to comply until title can transfer to you, so this is why you want to make sure your final payment is due upon transfer of title, not upon completion of the property.
Often times developers will offer a discounted price if they receive full cash payment at time of transfer of title, rather than having to carry back a balance that is still due to them. You may be able to take advantage of a "cash discount" if you get a loan. Contact us to discuss this before you write a contract if possible and we will assist you in what to include in your contract to protect your earnest money deposits.
You may have the ability to pay cash for your condo and then decide to get a loan after you close. We recommend you do not do this because you would have to pay closing costs twice (very expensive) and you would only be able to get a 50% loan to value vs. 75% if the loan is done at time of initial transfer from the developer to you. Again, please call us to go over the specifics so you fully understand what may be the best way for you to proceed with the purchase of a pre-sale condominium.
Lot loans available
If you are looking to purchase a lot now and build on it later, we have lot loans available. Remember if you do this, you will need to build the home from your own resources and then refinance the completed loan to "pay yourself back" from the proceeds of your cash-out refinance. Lot loans are currently available with 40% down and up to 15 year terms. See the above example "If you have already purchased lot and want to build on it".