PROPERTY OWNERSHIP IN MEXICO
In 1972 the government of Mexico initiated a legal process of entitlement to protect foreigners known as the Fideicomiso. Simply put, the government issues a permit to the Federally Chartered Bank of your choice. This allows the bank to hold title to the real estate as the "Trustee" for you, the "Beneficiary". The law authorizes Mexican banking institutions as trustees to take instructions only from the beneficiary of the fideicomiso (the foreign purchaser). The beneficiary has the right to occupy, develop, improve, mortgage, and enjoy the property. The beneficiary may also will or sell the rights and instruct the trustee to transfer title to a qualified owner. In 1993, the term of the Fideicomiso was extended to 50 years, with renewable periods. The renewal must be applied for within this 50 year term. This renewal process can be continued indefinitely, providing for long-term control of the asset. Thousands of people from countries around the world own real estate in many parts of Mexico.
FINANCING VACATION HOMES
It can be extremely difficult to qualify for vacation home financing, as well as very expensive. Real estate loans offered in Mexico through U.S. Banks are typically considered "Unsecured" loans, as today there is no viable means to put a mortgage on the property. Qualifying for this type of loan is difficult, time consuming and usually expensive. On the flip side, currently, if a buyer is successful in obtaining a loan for property in Mexico, they will be rewarded with a Form 1099 Mortgage Interest Statement for use as a deduction on their U.S. Federal Income Tax. Seller financing is another means of obtaining a vacation home. Sellers often own properties free and clear, and appreciate the benefits of a long term payout with a higher interest rate than they may obtain on a traditional investment. Obtaining a credit report adds to the seller's peace of mind. Often, an uninvolved third party collects, records and distributes the funds, and holds the necessary title documents. Fractional Ownership, for instance with another family, is another option. A carefully worded contract with explicit shared-use and property-disposal clauses is an absolute necessity. Finally, a home equity loan, on the buyer's primary dwelling, is often the easiest and most affordable way to obtain the necessary funds to purchase a vacation home. In addition, a Form 1099 is usually provided. These are just a few examples of fairly typical financing arrangements. Creative financing arrangements are best left to a finance professional, and as always, it is best to consult an accountant and attorney to verify the appropriateness of the transaction.
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