Residents versus Non-Residents

The availability of financing may depend on your residency status. Obviously a person who has taken the time and has the wherewithal to establish residency is a lesser risk (in the eyes of the mortgage holder) than a person who is not a full time resident and does not have the residency permit.

Financing for Non-Residents

In years past, financing through Costa Rica, banks was usually available for non-residents.  However, with the many changes in international banking the past several years, that has changed.  It is now very difficult, if not impossible, for a non-resident to get financing through a Costa Rican bank.  Seller/owner financing is still a possibility, depending on the situation of the seller.  With seller/owner financing, you typically need to make a sizable down payment (usually at least 50%), with the rest being financing for a relatively short term. But, again, that all depends on the specific situation of that property.  You can also use your IRA to buy property anywhere, including Costa Rica.  See the “Buying Property with your IRA” article.

Financing for Residents

If you are a legal resident, you may get a home loan from a local bank, either a private bank or one of the state banks. Unfortunately, the mortgage rates in Costa Rica are much higher than U.S. rates, and the closing costs are often much higher here.  Banks here will typically loan up to 70%-80% of the appraised value (not the negotiated purchase price).

Each bank has their own appraisers that they work with. Some banks won’t send the appraiser until the loan is pre-approved; others need the appraisal before they consider the loan. Because property values in Costa Rica are not as standardized, one thing that can happen is the appraised value is lower than the market value of the property. Most homes that expatriates buy are custom built. So getting a comparative value is difficult. Also, sometimes the appraiser won’t factor in features that make a home worth more on the market. Things like a panoramic view or state-of-the-art gourmet kitchen increase a home’s value significantly in the market, but sometimes not in the appraisal. It may happen that you get a loan approved for 70% of the appraised value, but it turns out to be only 55% – 60% of the market value.

Another factor to consider if you are purchasing a farm is that the bank will may only loan you money based on the value of the portion that is the residence. In other words, they consider farming a business, so that would make a loan on the farm a commercial loan rather than a mortgage. That means that the rate could be higher, the term shorter and the percentage less.

**Article from the archives of the American-European Real Estate Group**

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