James 's Blog

A Guide to Mexico Mortgage Loans and Mexican Real Estate- Terminology

Mexico Mortgage Loans — Sat, 10 May 2008 22:30:35 -0500

As an owner of Mexico Mortgage Loans (visit www.mexicomortgageloans.info) I truly believe that consumers benefit from gaining a basic understanding of the Mexico real estate buying process. This is the first of a few posts I will be contributing as a series titled "A guide to Mexico Mortgage Loans/ Mexico Real Estate." Todays post focuses on the terms, Fideicomiso, notario publico and esritura. If you are a realtor or mortgage broker with a potential Mexico buyer please contact me and I can send you a more detailed buyers guide that I have put together for borrowers.

What is a fideicomiso and why is it important?

A fideicomiso is a bank trust which is renewable every 50 years. It is similar to a deed of trust in the United States. Many borrowers buy in Mexico without obtaining a fideicomiso and either pay a mortgage directly to the developer or to a seller. This is dangerous since the borrower does not have legally recorded ownership of the property.

Who is the notario publico?

The notario publico is a government position of high power. Among the numerous responsibilities of a notario publico is the handling of land disputes, recording of real estate transactions and determining property taxes.

What is an escritura?

An escritura is the deed that a property owner receives in Mexico. The public registry is not as sophisticated in many Mexican markets as it is in the United States. Since this is the case, it is good to obtain a copy of the escritura from the existing owner at the time that you write a purchase contract. This document is crucial to obtaining financing and most lenders will need a copy of it.

Please continue to read future posts on this series as I discuss common mistakes borrowers make in Mexico, outline the Mexico home buying process, discuss how the process differs in Mexico versus state side and touch on how cultural differences affect the buying process.

Green Construction Thrives in Mexico

Mexico Mortgage Loans — Fri, 09 May 2008 00:55:40 -0500

I will be the first person to admit that I am by no stretch of the imagination a "tree hugging type." I drive a midsized sedan and my wife an SUV. Only half of our light bulbs are cfl's because I honestly like the look of regular lightbulbs in some fixtures better. Some of the produce my family buys is not organic. I even use pesticides to get rid of weeds and fertilizer to make my grass green (some say I should not even have grass in AZ, but where would my dog do her business....right?).

Still, I am a nerd when it comes to learning about new technologies, especially green building. On last weeks This Old House they mentioned the fact that the house was heated and cooled with geothermal energy. I sat through a whole episode on Discovery Science called Ecotech to learn about new ways of making solar power cheaper, the potential of hydrogen powered cars, building using passive solar, etc.

If you have made it this far into my post you are probably wondering what this has to do with Mexico Real Estate. Well, it is interesting to note that some of the greenest construction is occuring South of our border. I have been amazed that so many of the properties I encounter while financing homes in Mexico are "off grid." Let me give you an example of some of the properties being constructed in San Felipe, BCN. Many of these homes were built with panelized styrofoam walls that are covered in shotcrete (I hope I am getting the term right) and have an R-value that is more than twice that of a typical US home, greatly reducing the power needed to heat and cool them. The builders of these homes also claim that these homes are build stronger than traditional methods, quicker and with less waste. Often the homes use "gray water" collected to irrigate the drought friendly landscaping on site. Solar panels are typical, since it is expensive to send electricity in and efficient natural gas powered back-up generators produce the remaining power. In this case, a lack of lumber prompted builders to use highly efficient panelized construction and a lack of utilities created the need for recycled water and solar power.

Another example I want to mention is a developer friend of mine who is building an adobe development using green methods (solar, passive solar design, etc.). An advantage to adobe is that it retains heat in the winter and insulates well in order to keep homes cool in the summer time. It is also a very durable material. In some areas of Mexico, Adobe structures are hundreds of years old and have held up well to the elements. It is also locally produced. He is training a local crew to manufacture the bricks on site from local ingredients. His example shows how a cheaper labor pool can both produce and lay bricks in a cost efficient manner that is actually slightly less expensive than other building methods. I doubt a similar project could be produced in the US, but it is neat to see what he is trying to accomplish in Mexico. He has not even begun to officially market the project, yet there is already a pretty big interest among US buyers. They love the old World charm of adobe along with the energy efficent characteristics.

I realize that the US makes it more difficult to do some of these things. Local building codes, strong unions, stuborn contractors, expensive labor and a variety of other factors may not make them viable. I am not saying that we are behind in the US or that Mexico is better for doing this. I am merely stating that it is great to see that in some areas of Mexico green construction methods are utilized. Maybe we will see similar transformations here in the US.

Mexico Real Estate and Financing Offers Huge Potential

Mexico Mortgage Loans — Thu, 08 May 2008 00:13:38 -0500

This is one of what I hope are many posts aimed at educating potential consumers and agents about Mexico Real Estate and Financing. My goal is also to include opinion pieces about potential changes that could improve the process of overseas financing, truth and myths about financing in Mexico, detailed information about the merits of investing in Mexico, retiring in Mexico, frequently asked questions and other general industry information.

It is estimated that there is roughly 40-60 billion dollars worth of real estate in Mexico owned by US borrowers. Most of this is free and clear property or borrowers financed through the developer at astronomical rates of 12%+. In the past borrowers had no other choices. They could use peso based loans but those were often higher rates, based on an unstable currency and were typically a 1 year adjustable rate note. Needless to say, there is a huge demand for refinances in Mexico.

Many analysts believe that we have not even hit the tip of the iceburg as far as development in Mexico's resort areas. Costa Rica, Panama and Mexico are all seeing a steady stream of borrowers looking to purchase 2nd homes for retirement. One quick look at the demographics would show that this will only increase. Great weather and a cheaper standard of living are all great reasons to retire to mexico. It used to be that borrowers would just pull equity from their primary residence to pay for these 2nd homes, but with the decrease in home values in most US markets and the increase in prices for most resort areas (it is rare to see condominiums in many markets for less than 300k and not uncommon to see 500k+ median home prices). I live in Phoenix and I see first hand the number of snow birds who purchase properties in retirement areas in order to enjoy our great winters. Now imagine the appeal of purchasing a property on the beach for roughly $200 per square foot (much cheaper than beachfront in the US) that can be enjoyed year round and rented out as an investment property while not being occupied by the owner.

Now can you see the potential for purchases and refinances in Mexico. This is an absolutely exiting opportunity and I am thrilled to be funding loans in Mexico. Like I mentioned before, this is just one of many future posts meant to entertain and enlighten you about Mexico real estate and mortgages. If you have any questions about the process or general questions about this market, feel free to leave a comment here or contact me directly. I welcome the feedback. You can also visit my site www.mexicomortgageloans.info.