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What about financing your new second home in México?

  • 9 months ago
  • 1

I encourage a foreign buyer to arrange their financing in North America preferably from a broker or banker familiar with Equity Financing. There are many reasons why this is a big advantage.

Today the equity on your primary residence can be financed for about .03% interest rate per annum or less.

That Equity financing can be readily available up to 80% of appraised value of your primary residence. For someone who purchased a new home several years ago in Canada, it’s probable that equity is enough to buy a second home. If you then rent out your second home for a part of the year to friends and contacts, your debt is covered.

Your regular banker can provide pre-approval on equity finance based on your assets and liabilities whether it is in investments, real estate, or other.

Bank financing in Mexico is not only difficult but essentially cost prohibitive. Double digit interest rates are a bargain in Mexico and require a very large down payment, probably 50% or more.

Vendor financing is occasionally available on property resales from an existing foreign owners. This depends entirely on the sellers financial and life situation.

Perhaps 10% of listings may have this potential. Expect a very short term, probably one year or two years maximum and a massive down payment up front. Also expect the title to be held in escrow until the total balance is paid.

Summary

 My recommendation is to arrange equity financing in your home land or borrow from yourself through RSP savings etc. The market is going up, and costs will be covered with a few vacation rentals. Get that part organized before you come shopping for that second home in Paradise.

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