Mexico is becoming an increasingly popular place for foreigners to buy property, either as second homes, vacation or retirement homes.

While traditionally these transactions would be conducted in cash, there is now increasing availability of financing for property, both in Mexican pesos and US dollars.

Nevertheless, with the growing interest in Mexican property, banks and mortgage companies have begun offering “cross-border” loans, lending money in dollars at dollar rates for the purpose of buying property in Mexico.

Some people who are planning to retire to Mexico will sell their house in their home country and use the proceeds to finance property in Mexico; those who want to keep a 'base back home' may release equity from their existing home, rent it out, and use the dual proceeds to fund their retirement home in Mexico.

Many foreigners are financing their property in Mexico using financial vehicles provided in the US or Europe and/or Mexico. Below is a basic introduction to different financing options when purchasing

real estate in Mexico

Financing Property in Mexico

If you’re a foreigner living in Mexico and seeking finance from a Mexican bank, most banks will require that you have an FM2 (migrant) visa. However, banks will accept FM3 (non migrant visas) in some cases provided that you can produce your foreign bank statements which back up your financial circumstances. It's not absolutely necessary to be resident in Mexico to get a Mexican loan in pesos.

Loans in Pesos

Mexican banks have increased their mortgage lending in recent years, lowering interest rates and extending the length of the loans.

Obtaining a home loan in Mexico is a more complicated process, however, than in the U.S. or Europe. Part of the reason for this is that, in the event of a default, foreclosure on property is a lengthy and much more complicated process, so lenders take additional precautions.

Typically, Mexican banks offer loans ranging from five years to twenty years, although some offer longer loans.

It’s unusual for banks to finance 100% of the value of a property – although 80% to 90% is common these days, depending on the value of the home in question.

Cross-Border Loans

Most of Mexico’s largest commercial banks are subsidiaries of large multi-nationals. Some have started offering, through U.S. affiliates, cross-border mortgages for Mexican real estate, lending money in dollars to U.S. and Canadian residents to buy property in Mexico.

This kind of financing is also being offered by a number of mortgage companies. The amounts being loaned for property acquisitions has been increasing at a steady rate, and the lenders involved in the process expect the amounts to expand even more rapidly in coming years.

The maturities and rates offered vary from bank to bank. Loans are available from three years to 30 years. Rates on dollar loans are lower than those on peso loans, but higher than those on mortgages for buying property in the U.S.

Some are fixed-rate, and others are linked to international benchmark rates, plus a premium. Also, the cross-border loans  will be for a maximum 70% of the value of the property being bought, and the minimum amount of the loan is usually US$100,000.