Buying real estate will always be one of the best investments anyone can make in life. For this purpose, many people choose a mortgage loan that meets their needs and expectations. Discover below the definitive guide to mortgage loans in Mexico and find your ideal home at the best price.
What is a mortgage loan?
A mortgage loan in Mexico is a financing alternative to buy, build or remodel a property with different payment schemes . This type of loan can also work to buy land.
The terms of credit in Mexico to buy or remodel a property commonly range between 10 and 20 years, although every day there are more and more modalities below and above those ranges. This responds to the financial situation of the entire population.
How to obtain a mortgage loan?
The interested party must make a down payment at the beginning in order to be able to acquire the loan. This down payment can range from 10% to 30%.
During the process it is important to have more capital to cover additional expenses.
7 types of fees that may be charged on a mortgage loan
- Opening
Amount charged for the opening of a loan.
- Deferred authorization
This amount is a substitution for the loan origination fee, i.e., both may not be required on the same application. The main difference is that it is charged periodically and not in a single exhibition.
- Research expenses
Expenses to be covered with the financial institution during the investigation process for credit authorization.
- Balance confirmation
Also known as a balance certificate, it is a fee corresponding to the issuance of the balance statement.
- Partial and total prepayment penalty
These are commissions derived from the partial (unsettled) or total payment of the loan (full settlement). Few credit schemes currently charge this fee.
- Penalty for late payment
Charge generated by the late payment of an agreed monthly payment, but before the next cut-off date.
- Penalty for non-payment
Commission charged when the required payment is not made in the corresponding period.
In addition to these commissions, you will also find other types of additional payments such as deeds, notary fees and insurance. These amounts may be included in the loan application with their corresponding interest, however, each institution or bank may handle them differently. It is necessary to clarify this information with the advisor accompanying you in the process.
In addition, it is essential to comply with the basic requirements for the approval of a mortgage loan. As are:
- To have a good credit history.
- Be of legal age and have a verifiable income capable of covering a mortgage payment.
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What types of mortgage loans exist in Mexico?
Currently there are 6 types of mortgage loans that you can apply for according to your objectives:
- Traditional Mortgage Loan
It is used for the purchase of a new or used property.
- Liquidity or Free Destination Mortgage Loan
This type of credit is used to obtain financial liquidity and cover a need other than the purchase of a property. This requires the applicant to pledge a property in his or her name as collateral to secure the loan.
- Payment of liabilities or substitution of mortgage
Changing a mortgage from one bank to another is possible, and this is important to know because you can make this adjustment according to your future needs. Bank 2 can issue a loan to pay off your mortgage with bank 1. This is recommended when you find an opportunity where commissions, insurance and interest rates are better.
On the other hand, there are loans linked to mortgage loans. These can be requested to make improvements to the property or simply to obtain liquidity at that moment.
- Construction Mortgage Loan
This type of credit is requested to build a property on a plot of land.
- Mortgage Loan for Land Purchase
This type of loan makes it possible to acquire the land on which you want to build a house.
There is an option where the credit for the land and the credit for the construction can be combined in the same operation.
- Mortgage Credit for Improvements
The purpose of this loan is to make improvements to a property.
Amounts and interest rates that apply to mortgage loans
The cost of a mortgage loan depends on the total amount requested, down payment, terms to be paid, interest rate, commissions and insurance. Generally, as with other types of credit, a shorter term with a low interest rate will lower the total cost of a loan when it is paid off.
Some banks and institutions allow the integration of commissions and insurance costs to the total credit application. For this reason it is important to know the CAT (Total Annual Cost) of the credit, which will allow you to know the factors that affect the total value.
Keep in mind that a mortgage loan is secured by the property or land acquired. Therefore, in the event that the holder stops paying the loan, the bank or institution may claim the property to partially or totally cover the amount of the financing.
Who can issue this type of credit?
With each passing day, banks are offering better interest rates for the purchase of a property through a mortgage. In this scenario we can see historical rates of up to 7.7%. Banks can issue terms from 5 to 35 years, and can issue loans of up to 20 million pesos .
There are also institutions aimed at enabling part of the population to acquire their own home, among which we can find Infonavit and Fovissste, whose payment methods are linked to other types of organizations such as the IMSS.
There is a third scenario where payment agreements are made directly with the real estate developer of the property in schemes of 6 to 24 months . Either in a pre-sale or immediate delivery mode.
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What type of credit should you choose?
The choice of mortgage loan will depend on the type of property and/or operation you want to carry out, as well as the total value of the loan, terms and down payment you have. Below we explain each of the concepts that you should understand perfectly.
- Interest rate
Cost to be paid according to the amount requested. Remember to check the type of interest rate that the scheme handles, it can be fixed, variable, capped variable and mixed.
- Total Annual Cost (TAC)
As with a credit card, the CAT is the total annual percentage rate that includes most of the expenses involved in the credit: interest, commissions and insurance.
- Currency
Not all mortgage loans are made in local currency, some can be requested in other units of value such as VSM (Minimum Wage) or UDIs (Investment Units).
- Capacity
Basically, it is the amount of money the financial institution can lend you in proportion to the value of the property. In general, the appraisal is 80% of the value of the property.
- Amortization
This concept refers to payments made directly to the principal without considering interest.
- Credit life
This is the maximum time you will have to pay according to the payment schedule provided by the institution.
- Binding offer
Always remember to ask for this information during negotiations. This concept contains the information on how much the credit will cost you in pesos and cents.
At Nolab we hope this information will be of great help in choosing the best option for the investment of your assets. Remember that we have properties in the best areas of the CDMX and the best destinations in the world in the United States and Europe. Contact us at One of our advisors is available to provide you with all the information you need.
