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Let's Go2Mazatlan - Articles Ask the Real Estate experts
We invite you to e-mail your questions regarding buying or financing Real Estate in Mexico to buyinginmexico@hotmail.com Q. “I am hearing more about Peso loans. How do they differ from US loans and who can get one?” John Fisher, Denver, CO. A. Peso loans are issued or granted by Mexican banks for Mexican Nationals or for foreigners who legally reside and make their living in Mexico. They closely mirror conservative loans issued in the US or Canada with the exception of the interest rates offered. For Mexican nationals, they are the only option for a mortgage, and for many foreigners who no longer show income in their own country, peso loans can be the help needed to gain a foothold in the real estate market here in Mexico. Prior to five years ago, Mexico had no secondary mortgage market and interest rates were exorbitant at around 25% to 35%. In addition, these loans had month to month rate adjustments so it was impossible to tell what the payments would be. It is little wonder that the real estate purchases in Mexico remained all cash buys. In 2004, less than 3% of all real estate in Mexico had financing attached to it, contrast this to 95% in the US. Middle income buyers were essentially priced out of buying until they could save up enough money to pay for a property outright. This kept the housing market in Mexico depressed and broad ownership at low rates. A little over five years ago however, banking rules were changed and the advent of a secondary market for these mortgages allowed banks to lower their interest rates to make loans more attractive. It has sparked a marked increase in home sales for the middle income home buyer, allowing them to start sharing in the future of their country. We have all seen the impact of the availability of car loans in Mexico, but just as impressive, has been the availability of mortgages to the housing industry.
Currently, in our experience, the majority of US or Canadian citizens who apply for these loans are in the real estate or timeshare. They no longer obtain income in their home country, but are making their living entirely in Mexico. Making your living in Mexico is the key to qualifying for a peso loan. In addition, to qualify, they must have a banking relationship in Mexico for at least six months and be paying taxes in Mexico. Of course you must be able to prove your income is sufficient to make mortgage payments and your credit report in Mexico must be free of bad debt. For foreigners, the lender will also pull a credit report in the applicant’s country of origin. Generally, Mexican lenders require a 20% down payment, but it can be as low as 10% if the borrower qualifies for government backed programs. Many foreign clients are shocked at the difference in interest rates between the interest rates here in Mexico as opposed to their home countries. Depending on the loan program for which they qualify or want, interest rates for peso loans in Mexico range between 10% and 14%. One of the key factors that goes into determining mortgage rates in any country is the bank to bank to bank interest rate; or the interest rate that a given bank pays to obtain money. This rate fluctuates greatly from country to country. For example, in the US at this time due to governmental interference, this rate is at a record low and therefore the average 30 year mortgage in the US is now 5.65%. However in Mexico, currently this rate is at 8.25%, so the banks must charge more for their mortgage interest rates. The markup or profit for the lenders is approximately the same in both countries, but since the Mexican bank is paying more for their money, the interest rate for a client’s mortgage is based accordingly.
The result has been that US citizens have been spoiled by these incredibly low rates and have now come to expect them. Historically, however, interest rates in the US have ranged between 8% and 14% since the 1960s. Those of us who purchased homes before this new century remember well paying those rates. The new administration in the US is continuing in this practice to avert continued collapse of the economy. We constantly have to have to remind our clients that we are not in the US, nor Canada… but Mexico. Mexico has no housing disaster and therefore it is an entirely different matter. The banks here are very healthy, the housing industry is healthy and the mortgage interest rates are more in line with historical rates in the US prior to the Bush administration. The most important thing is that mortgages are available in Mexico and if approached properly, they remain an essential tool in building wealth. Email to a friendMEXLend, Inc. • MEXLend, Inc. Is a Mexican mortgage brokerage that currently represents 15 different lenders offering over 200 different loan options in Dollars and Pesos for buyers looking to purchase vacation or investment property throughout Mexico. In recently announced results based upon post-closing client interviews conducted by Mexico’s largest US lender, MEXLend won the#1 mark of distinction for both client satisfaction and fastest closings for the second straight cycle. MEXLend can be reached at 322-132-7991 (in Vallarta), 917-779-9061 (while in the US or Canada) or go online at www.mexlend.com More about Mazatlan:
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With the phenomenal growth in Real Estate around 
Locally, this impact can be seen in the massive housing projects that continue to pop up in the 
It must be kept in mind that since the year 2000, the US government has interfered with mortgage rates to keep them low - at first, to push the housing industry, and now to prop it up. We can all see where this has gotten us. 
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