By Jennifer LaCharite, Costa Consultants International

You’ve been searching for Costa Rica beach condos for sale and finally found the one you want. Now what? Are there financing options for foreigners in Costa Rica? There are a few options for foreigners looking to finance property in Costa Rica but it may not look like what you are used to back home.

Can You Get a Mortgage in Costa Rica?

The simple answer to whether or not a foreigner can qualify for a mortgage or loan in Costa Rica is yes, however, after reviewing all the documents and costs associated with getting the loan, many decide not to take it. It can be difficult to qualify for a mortgage or loan if you are not a permanent resident of Costa Rica. The required paperwork is a big hassle because you do not have the financial history in Costa Rica that you do back home and all paperwork must be officially translated into Spanish.

Also, the banks in Costa Rica do not operate with the efficiency that you are used to in North America. It can take months to get an answer, and typically that answer is no. Also, the associated fees are quite high. They can be 3 to 5 percent higher than a traditional loan in Canada or the United States and the closing costs are as much as 3 percent of the loan, on top of the normal closing costs.

If you are granted bank financing in Costa Rica, you will likely secure a 15-to-30-year loan that will require a sizeable down payment, typically in the 35 to 50 percent range. Interest rates will likely be higher than you are used to seeing. Expect a 7 to 10 percent interest rate for USD loans and up to 20 percent for Costa Rican colones!

A recent exception is a new financing option from Costa Rican bank Banco BCT S.A. (Santa Ana). They began offering a new financing option for US citizen residents and non-residents of Costa Rica in February of 2022. They now offer second home loans and bridge loans, with a loan-to-value of up to 65 percent. Banco BCT S.A. will finance up to 65 percent of a home’s value (up to $875,000 USD) with terms up to 20 years and fixed and variable rates around 7.5 percent to PR+4.75 percent. The best part is - loan details are available in English!

Refinancing Your Home

If you have a home in North America with a significant amount of equity there are ways to refinance your home to buy that beach condo in Costa Rica you have your eye on. Home equity loans, or second mortgages, can be a much simpler option for financing a property in Costa Rica. Foreigners buying property in Costa Rica typically leverage a home equity loan plus the down payment from their savings to pay for their Costa Rican property in full as cash buyers.

One of the best parts about taking out a home equity loan is that you’ll be able to do this in your home country, rather than in Costa Rica. This means you will have easy access to your proof of income, credit score, and other information that will help you secure a loan. Additionally, it’s fairly straightforward and your loan transactions are conducted in English, meaning no translations are necessary. Also, your loan is not contingent on the property you’re purchasing in Costa Rica, so you can buy that beach condo with less hassle.

Developer Financing

If you are looking at buying that beach condo in Costa Rica directly from a developer, you may be in luck. Many developers actually carry in-house financing, which could be a good option. As with any property anywhere, it is crucial to verify the financial stability of the developer and the quality of their homes.

It is very important to do your due diligence when looking to buy directly from a developer. Be sure to work with a licensed real estate agent you can trust and a top-notch law firm. It is not advisable to buy directly from a developer or use the developer’s attorney.

Private Financing

Many private sellers in Costa Rica that are willing to offer financing are selling their property because they are motivated to sell, making them more open to offers. A typical owner’s financing is for 1 to 3 years at an interest rate of 6 to 9 percent, with a 50 percent down payment. Obviously, the terms will vary with owner financing and are negotiable.

Mortgage laws in Costa Rica are quite stringent so both the buyer and seller are protected in a private seller mortgage deal. The buyer closes on the property, making them the legal owners. The seller carries a mortgage or a legal trust against the property until the balance is paid off. Your real estate broker will use a trusted third party to handle the transaction. You will want an experienced agent to write up the offer so that the seller is guaranteed that the buyer can’t sell the property without their loan being paid off and the buyer is guaranteed that the lien will be removed when he does pay off the loan.

Private Lender

There are private lenders available to help with financing options for foreigners in Costa Rica. Typically, a private lender will agree to finance for up to 70 percent of the property value or actual property cost for up to 15 years, charging an interest rate of 8 to 16 percent.

Each lender will have its own list of requirements but they will likely request a property evaluation, which will cost the buyer between $500 and $1,000 USD. They may also request your bank statements for the last 12 months, plus proof of where the money is coming from and proof of regular income.

All lenders will charge the buyer an administration fee, which is can be around 1.5 percent of the loan. Most lenders will require you to take out a life insurance policy and insurance on the property.

Rest assured, there are financing options for foreigners in Costa Rica. The first step is to find a trusted real estate professional to help guide you through the process. Contact me for more information. Enis Davis-Lewars, Real Estate Agent, http://www.costaricavacationrealty.com