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There are hundreds of articles online about financing property in Costa Rica. Most articles are outdated, and few have the correct information. That’s why you should do your own homework by calling around if you’re looking for a mortgage to purchase property in Costa Rica.
Financing property is very easy here if you’re a citizen or a resident. Lenders want to ensure you have strong ties to the country; they call it “arraigo“. That said, very few local banks finance home or property purchases for non-residents. But where to get started to find out what your options are?
I suggest that before you start looking for a property, you should first secure the possibility of the financing that you need. Talk to your real estate agent about financing before you start shopping.
Here are a few guidelines that you should take into account:
High Interest rates
Before you start looking for a mortgage, you should know that we have very high interest rates compared to other countries. In 2024, most banks charge between 8 – 10% in US dollars. That’ll probably be a fixed rate for one or two years. Then, the rate will adjust every year, based on the New York prime rate + whatever the bank adds to that. That’s usually another 2 points.
Credit score
If you have a high credit score, you’ll have more probability of finding the necessary financing. But they’ll need to know much more about you than you think. Get ready to supply a long list of documents.
Loan Term
The normal loan term is 25 years or more. If you’re 60 years old, they might not finance your property.
Rent to Buy
This does not exist in Costa Rica. With luck, you will find a seller who is willing to rent the property for a year but will then want to sell. Most sellers will not take their property off the market so that you can rent for a while.
Downpayment
Get ready to show an excellent downpayment deposit. Potential buyers tend to shop around for a very low downpayment, but then chances are that it won’t work. Here are some guidelines.
- Banks will seldom lend more than 70% of the appraised value when it’s raw land.
- Private lenders will never lend more than 50% of the appraised value.
- Most banks will finance 80% of the appraised value of houses.
Private lenders
Many private lenders will finance property in Costa Rica for a few years. Be aware that their interest rates usually run between 12 – 18% in US dollars.
Appraisals
Most lenders have their own appraisers. Count on a lower appraisal than your purchase price. So, build that into your offer.
Taking over an existing mortgage?
Some sellers and real estate agents will offer you the option of taking over an existing mortgage. It’s important you understand that the borrower has the obligation to notify the lender of any changes in ownership.
So, if you’re planning to take over the mortgage, you’re running two risks:
- the lender will foreclose on you because you’re not the borrower,
- the lender will not clear the mortgage on the title when you’ve paid the entire loan.
Creative financing
Do you want to get a bit creative with financing? Here are some other ways of financing a home or condo purchase.
Looking for a mortgage? Are you a United States or Canadian citizen or resident with a good credit score and buying a property with one of our agents? Then we can try to assist you in your search. We will first ask you who the attending agent is and then refer you to a well-known banking institution. Contact us now for financing property in Costa Rica.
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