Financing a Property
Find out about the financing options when purchasing a property in Costa Rica...
Often the easiest and fastest way to finance a property purchase in Costa Rica can be directly through the owner. The recent worldwide fiscal crisis has increased the power of the buyer's position in today's market, so many sellers will consider at least short-term financing if they receive a reasonable down-payment. In this instance the seller receives a notarised memorandum from the buyer that is registered in the Public Registry of Real Estate Property (el Registro, in Spanish). The seller may wish to protect the financing agreement with a trust (fideicomiso) that can be created to administer the property sale.
Banks have become more aggressive and sophisticated in loaning to expatriates. The application process is similar to those in, say, Canada or the United States, but the process usually takes longer, so pre-qualification is important to sellers, who are not always willing to wait for paperwork to be completed. Banks usually require information from the borrower similar to that required in most other countries, including proof of income, credit history, and assets and liabilities.
Interest rates are generally higher than in, for example, the US or Canada by 2 to 3 percent, and are almost always set long-term at a variable rate. As an example, in 2012, it was possible to borrow up to 80 percent of the survey value of a house, with an average 7 to 9 percent interest rate depending on term lengths, which are typically 10-20 years. These numbers can vary for many reasons, including whether the property is developed, or whether the buyer will use the property as a first home or a vacation home.
Bank loan documents are almost always in Spanish, so unless the buyer is fluent and understands the Costa Rican legal system, a legal professional is needed to guide the buyer through the process. It should be noted that banks often require evidence of a life insurance policy for the amount of the loan. The insurance can be purchased in Costa Rica through the bank and the bank often includes the cost of the insurance in the monthly loan payment. The bank is named as the beneficiary of the insurance. In addition, historically it has been difficult to get a bank loan on property in the Maritime Zone because the land is not titled. However, this has begun to change and some banks will now finance beachfront concession property.
Each lending institution has its own valuer. The cost of a valuation in Costa Rica (avalu perito) varies depending on the size of the property.
There are mortgage brokers in Costa Rica to help explain the loan procedures and help you secure a loan. Their fees may add 2 to 3 percent to the overall cost of the loan. Private lenders tend to be more flexible with terms, require less paperwork, and close more quickly. Private lenders, however, usually charge higher fees and higher interest rates and offer a shorter (although often renewable) loan term.
Any statements concerning buying a property are based upon our understanding of current laws and practices in Costa Rica which are subject to change. While every effort has been made to offer information that is current, correct and clearly expressed the publisher is not responsible for the results of actions taken on the basis of information contained in this summary, nor for any errors or omissions. Readers are encouraged to seek professional advice concerning specific matters before making any decision.