Can I finance a home purchase in Costa Rica?

Questions like “we were wondering if it is possible to obtain financing as I am looking to finance a home purchase in Costa Rica” and “I am interested in this property, but need to know about financing first” are very common.

So in this article, I will cover the issue of being able to get a mortgage or finance a home purchase in Costa Rica if you are not a resident or citizen.

As most of you probably know, I always like to explain things in a short and concise way without making you read a mile-long article, so the answer is NO, you cannot, unless…

That was a very short answer, right: NO, you cannot finance a home purchase in Costa Rica. Unless you’re Costa Rican or a resident in Costa Rica. But things will get better for you, depending on the circumstances, the location you plan to buy. And who you can purchase from.

First of all, let me explain why you cannot finance a home purchase in Costa Rica without being a resident. So all this makes more sense to you.

Imagine

Imagine a Mexican retiree arrives in Los Angeles – California, his name is José. José has worked all his life in tourism in Cancun. He has made enough money to retire on a nice retirement income.  José and his wife Juana have been looking online at homes for sale around Los Angeles for a while. The spouses think they have found the home they want to purchase. An email to their realtor says “we were wondering if it is possible to finance a home purchase of our new home in Los Angeles”.

Well, José and Juana don’t have legal residency in the U.S. They have no bank account. Also, they have no local credit report and no track record.  They could be illegal immigrants or they could be drug dealers. Or they could be anything but honest retirees just trying to buy a home in San Jose, California. They need financing to make that dream come true, just like you probably do now.

I’m sure you now understand why you won’t be able to finance a home purchase in Costa Rica until you’re a legal resident. At least, there won’t be any bank financing available for you until then.

Looking to finance home purchase?

If you are in the market for a vacation home, an investment property or a retirement home in Costa Rica, you need a mortgage. And you are not a resident, you will have the following options:

Owner financing

One option to finance a home purchase in Costa Rica could be owner financing. Some owners are willing to finance, probably at 50% LTV (Loan To Value) or less, for a short period like 2 – 5 years. Bank interest rates vary between 6 – 8% annually (9% in 2018). So, be ready to pay more or less the same as you would pay the bank. Which is why sellers like offering owner financing for a short term.  Most sellers of a home in Costa Rica will not be able to allow for owner financing because they need to buy another home.

Some developers in Costa Rica offer owner financing options for foreigners without residency. Check with your American European Real estate Group affiliate if there are any finance options in that particular area of the country.

Private lending

Another option to finance a home purchase in Costa Rica is to get a private loan. But mortgage rates are usually anywhere between 10 – 18% annually and most will lend 50% LTV or less. Many will only lend for 1 year and will request renewal costs and commissions every year. Usually, your real estate agent can connect you with a private lender.

Home Equity loan

You might be able to find a lender in your home country for an equity loan on the assets that you own.

Not all lenders are willing to allow you to use the equity loan for an investment in a foreign country. Some do. The advantage would be that your interest rate will be considerably lower than any interest rates you might find in Costa Rica. Even if they are regular bank rates.

Check with your banker for equity loan options.

Retirement funds

You might be able to use your retirement funds, to finance a home purchase in Costa Rica. If you have any. Such as an IRA, a 401(k) or a Canadian RRSP will work if you know the rules. You are not allowed to live in the property yourself when using your retirement funds. But, there are several options for you to use to funds when buying an investment property in Costa Rica.

VA Loan

Looking for a VA loan? The read this article.

Rent a home

If you plan to move soon to Costa Rica and you will not be able to secure a mortgage or to finance a home purchase in Costa Rica, I recommend you rent first until you are able to get your legal residency. Once you have your legal residency, our agents will help you with pleasure to find you the home in Costa Rica, with the necessary financing that you are looking for.

To contact one of our agents, click here.

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