How to Get a House or Land with Little Money in Mexico?

For many Canadians, getting a real property in Mexico would be a dream come true. It would be the ideal investment. No doubt about it. Every tourist who’s ever had a taste of tropical paradise would want to keep a piece of it for themselves – whether as something they could use for themselves whenever they want to or as something they could potentially earn from in the long term. Sometimes, however, dreams don’t always align with reality because you have hurdles to face. Like what if you don’t have enough cash to buy your dream Mexican property? What if you cannot afford to buy a house or a piece of land in Mexico? How do you get a house or land with little money in Mexico? Do you need to wait until you have the money?

Well, the good news is that there are ways. You don’t have to give up on your dream of owning a house or a piece of land in Mexico just because you have little money or you cannot afford the down payment. There are a few options you can check out and you can decide which one is the best for you given your budget and your capacity to pay.

Read on and you’ll know how you can acquire a house or a piece of land in Mexico without having to empty your own pockets.

How to Get a House or/and Land with Little Money in Mexico

There are several ways you could finance a real property investment in Mexico with little money. Here are some options you can choose from:

1. Developer Financing

Some real estate developers in Mexico typically do not extend a mortgage that covers the total cost or the majority of the entire cost of a development project in advance. So these developers usually only require a partial mortgage after you've made a significant down payment on the property instead of requiring you to pay the entirety of the purchase amount spot on and in cash.

Look for real estate developers who offer in-house financing or installment payment plans up to a certain number of years. How many years of finance Mexican developers offer may vary depending on the real estate development and on the developer themselves. Some developments are in the presale stage – such as condominiums – and you may be allowed to pay off the property deposit anywhere from three to 18 months, or even more. You will then need to complete full payment of the property upon the property's completion.

It is quite common for real estate developers in Mexico to require at least a 50% down payment when you take possession of the property, and the balance will be paid off over an average time period. There are also developers who offer anywhere from five, eight, or 10 years in financing. If you're talking about a rental property, you can allow the rental income from this said property to pay for itself ultimately over time.

With developer financing, however, the interest rate is going to be most likely higher compared to what you'll find in Canada. But it is a pretty good deal if you don't have the full down payment for a condo or a new property in Mexico or if you don't qualify for a mortgage from a Canadian bank.

It's also worth noting that there aren't too many developers who offer developer financing on a condo in Mexico. But there are a handful of them. The best way to get access to developer financing for condos is to get in touch with real estate agents.

2. Pre-Sales from Developers

Some foreign investors buy presale because it is cheaper compared to purchasing a real estate property that is already fully constructed. Moreover, with buying pre-sale, there is no risk of a property bubble bursting even before you can occupy the building or resell it to somebody else. Buying in presale also allows you access to flexible and attractive payment options.

Different developers offer different financing payment options for pre-sale properties. The typical options are:

• 30% down payment - 40% in payments within construction period; 30% upon delivery of property

• 50% down payment - 30% in payments within construction period; 20% upon delivery of property

• 80% down payment - 20% upon delivery of property

Customarily, by investing 50% or more in a project as down payment, the developer will offer a discounted price.

There are also options that require a 30% down payment and the 70% remaining price is payable upon delivery. This is great for foreign investors without the liquidity and who are looking into financing the remaining 70% through a financial institution.

You can contact a real estate agent to get access to these pre-sale options from developers and you can get your agent to negotiate on your behalf.

3. Invest on a Property with a Friend or Family

For those with little money or who cannot afford to buy a real estate property or a vacation home in Mexico on their own, the idea of sharing one with a friend or family would seem very tempting. And it does make sense for a lot of reasons. It seems easier to just pool your resources together with a partner to afford a property in Mexico. After all, more people means more funds, and more funds means more buying power. This also means that with co-ownership, you can afford a bigger or a better property.

Moreover, buying a property with a friend or with family in Mexico allows you to split the costs and share the responsibilities to make the venture a lot easier to manage. But how do you go about sharing the property? You can rent out your house in Mexico or list it as an Airbnb and share the earnings or profits with your partner. Or you can take Mexican vacations together with your partner as often as you can and not worry about accommodations anymore. You can also take vacations separately and agree on a schedule so you can each use your vacation house freely.

However, as sensible as it sounds, co-ownership can also be tricky. That is why it is very important to weigh the advantages and disadvantages properly and to carefully select the person you're jointly owning a property with. It is also important that you talk about an exit strategy in the event that things do not go as planned or things become too complicated.

Moreover, talk with a real estate agent about what it means to buy a property in Mexico with a friend or with a partner and to co-own that property.

4. Take a Home Equity Loan

If you don't have enough to pay for a property in Mexico in cash, you can take advantage of financing options in Canada. For one, you can take a home equity loan. You most probably have equity in your first home in Canada, and you can tap into this equity. It is an easy and simple option, and you can get about a 6% fixed interest rate.

With a home equity loan, you are allowed to borrow money using your current home's equity as collateral. Equity is how much your current home or property is worth, minus the amount of the existing mortgage on this property. You will receive the money in lump sum from a home equity loan.

You just have to be careful because, typically, a home equity loan has a fixed interest rate. That means this interest rate won't change. And if you are unable to pay back your home equity loan, the lender can foreclose on your property or home. As such, if you are considering taking out a home equity loan to finance a new property or a second home in Mexico, you need to make sure you have the capacity to pay the loan back so as not to hurt your home. You should also note that home equity loans may have other upfront costs and fees, so factor these in with your monthly payments when you're shopping around for a lender.

Home Equity Line of Credit is also another option. This is a relatively more flexible option, and you can choose to take money out as you need it. You will need to pay an interest rate that will depend on your home equity as well as your credit score.

5. Use Your Retirement Plan

You can use your RRSP or registered retirement savings plan to buy a house or a piece of land -- preferably an investment property -- in Mexico. This is a wonderful thing for many Canadians who would want to escape the cold winters in Canada and bask in Mexico’s tropical sun for many weeks, or even for months. 

A new program is called the Vacation Home Buyers Plan (VHBP) and it aims to help Canadians borrow from their RRSPs to pay for the down payment for a piece of land or a house in Mexico while also addressing the two biggest hurdles for aspiring Canadian vacation property owners. These hurdles are the fact that down payment requirements for a property in Mexico can range between 20% and 30% of the property's value, which can be a lot, and the difficulty of securing a mortgage on a house in a foreign jurisdiction.

The VHBP's structure is designed in a way that allows Canadians to access their retirement plan and use it as a down payment without any tax implications. This new program is also hinged on many strategic relationships with major banks in Mexico that are willing to finance Canadians who are qualified and who meet the requirements for down payment deposits.

The VHBP has no limits on the amount of withdrawal within your RRSP. And you will have up to 20 years to repay this, therefore ensuring that your retirement funds are available for when you retire. 

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So how do you pick the option that is best for you? Take a look at your finances and your capacity to pay. Pick the funding option that is least burdensome and whose terms are most amenable to you. Weigh the pros and cons of each option very carefully. It is also a good idea to consult a real estate agent in Mexico so you get a more detailed look and a much better understanding of the terms of each financing option.

In the end, the goal is to own a house or a piece of land in Mexico that would ultimately become an asset and a piece of investment. It also makes sense that if you have little money and you are taking advantage of financing options, you also make ways to earn from your investment one way or another so you could recoup whatever you have spent.

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