Daniela Quiros, Saturday, 9 November 2013
This article is part of a series of 8 articles about buying property in Costa Rica. The other articles in the series cover the following topics:
Costa Rica is a friendly country when it comes to foreigners buying real estate here. However, in terms of mortgages the situation is different. Most
banks in Costa Rica finance residents only. Not so long ago, during the 2006-2009 real estate boom, most banks were financing foreigners buying
property in Costa Rica. Currently, there are a few banks providing mortgages to foreigners, and they make you go through all circles of bureaucratic
hell. Both residents and non-residents looking to get a mortgage in Costa Rica face a lot more difficulties and requirements than in the U.S., Canada
and most European countries. Nevertheless, the financial sector of Costa Rica is far less affected by the world economic crisis than that of the
above-mentioned countries. Although most public and private banks offer fairly aggressive mortgage conditions, high credit standards with down
payments of 15-20 % limit the number of qualifying applicants.
In most cases, foreigners borrow funds from their home country, or opt for a property where the seller can offer financing. There are several
structures that protect both buyers and sellers entering into financing relationship.
When researching the mortgage options in Costa Rica, foreigners must comply with several requirements. First of all, you must be a resident of Costa
Rica. For most European, American and Canadian citizens it is a rather accessible endeavor. The banking system in Costa Rica offers quite a lot of
mortgage options, but newcomers to the country will most likely need assistance from a real estate agent to avoid drowning in requirements,
differences and ulterior dangers.
Mortgage Brokers in Costa Rica
Forget it because there are none. Local banks do not pay commissions, so brokers are non-existent. There are some private companies that offer
guidance and assistance, but they charge their fees separately from the mortgage conditions specified by the bank.
Your Credit Score in Costa Rica
In most cases, a good credit score is accepted by Costa Rican banks, especially from US and Canadian credit score systems. Foreigners from countries
that do not have a formal credit report system, face difficulties obtaining a mortgage in Costa Rica.
Most Costa Rican banks will not set your mortgage payments at rates higher than 30% of your net income, or your debt free income.
Mortgage (Hipoteca) Requirements
While most Costa Rican banks have English speaking personnel, the requirements to apply for a mortgage are in Spanish. In most cases, banks require
the following documents required by SUGEF, the Costa Rican bank regulator:
- A customer signed application form.
- Social security number (seguro social).
- A utility bill, or property tax bill with a clearly visible home address of the applicant in Costa Rica and in his home country.
- A copy of applicant’s ID (cedula), driver’s license, passport.
- Income verification:
a) If the applicant is currently employed by a Costa Rican company, he must present a verification letter from the company to the bank indicating the
time applicant is with the company, his position, gross and net salary. In addition, a proof of insurance from CCSS is required.
b) If the applicant is self-employed, he must present a CPA (Certified Public Accountant) authorized income certificate indicating his activity,
position, gross and net income for the past fiscal period. Account statements, receipts and anything that certify the income.
c) If the applicant’s income is of foreign origin, he must present a CPA authorized income certificate indicating the activity, position, gross and
net income for the past fiscal period and average. Equally, account statements and receipts certifying the income. Also, for the U.S. citizens- a
of Tax Return Report and W2 form for the past three years. In case the CPA certification is done outside Costa Rica, a Costa Rican Consulate in the
respective country must notarize the documents.
- Bank statements from retirements, investments, savings and current accounts for the past six months.
- A credit card statement for the past three months.
- Home and life insurance.
- Proof of applicant’s assets, such as certificates of title and deeds of warranties.
- In case the applicant owns the property and cars in Costa Rica, a registered study of those.
- For property in question, tax certification of all paid municipal taxes.
- A copy of sale-purchase agreement.
- Two copies of Catastro Nacional certified surveys of the property in question.
Note: the requirements differ depending on the bank, so make sure you check this with the bank you are planning to apply for the mortgage.
Currently, several state and many private banks operate in Costa Rica granting mortgages to both foreigners and residents. Here is a brief outline of
some mortgages on offer, but you have to understand that each application is treated according to applicant’s income, credit history and the type of
property in question.
currently offer loans to foreigners who are not legal residents. They require a good credit record and proof of income from your home country.
Scotiabank currently works with applicants from the USA, Canada and the UK. Banco de Costa Rica offers two options for both residents and foreigners
to obtain a loan in dollars and colones. Only residents qualify for Mortgage Residency Credit which requires proof of income and residency. It offers
credits starting at $1,000 up to $700,000 for a period up to 25 years. The bank charges 2% in commission. Non-residents, on the other hand, can apply
for a minimum loan of $50,000 with a 3% commission and up to 20 years duration.
, a privately owned Costa
Rican bank, offers mortgages
both US dollars and colones for a period of 15-30 years. They finance only 70% maximum and charge 1% commission. Special requirements apply to
foreigners and residents whose income is of foreign origin. You need to provide references from your bank and supplier; certify the beneficiary
ownership structure of your company; present the full profile of the company’s activity and financial report of the company’s assets.
Current real estate market urges sellers meet buyers’ need in financing, especially since banks make it difficult for foreigners to obtain a mortgage
loan. Sellers tend to offer short-term financing at rates similar to those of the banks. A buyer must transfer the down payment of about 50-70% to
have 2-3 years for the rest of the payment. It is often the case that the buyer purchases the property on these conditions; applies for and gets the
residency; then applies for a loan from the bank to finance the remaining amount he owes to the seller.
The U.S. citizens sometimes use their retirement plans, such as IRA, RRSP and 401K to purchase real estate in Costa Rica. Others get an equity loan
the house in their home country to buy property in Costa Rica while their house is in the process of purchase-sale.
Every bank works with its own property appraisers. Some banks send appraisers when the applicant has been pre-approved for the mortgage while others
send appraisers before they consider the application. One thing that can come as a surprise during the process is the appraised value can come out
lower than the market price of the property.
The appraisers do not take into account factors that add up value to the property, such as a panoramic view or state-of-the-art kitchen. As a result,
you end up with a 70% loan which covers only 55-60% of the actual price of the property.
Before You Apply for a Mortgage
One more thing to consider when buying real estate in Costa Rica is the bank will only provide a mortgage up to a certain amount. This amount is
constantly fluctuating. In addition, it is advisable to get yourself pre-approved even before you start choosing properties with your real estate
agent. This is due to significant differences in banks requirements. Doing so will significantly help you save your time and effort in the long run.