Financing Property in Costa Rica

Title image about financing property in Costa RicaHow about financing property in Costa Rica? That’s the question on the minds of many who would like to own a piece of paradise. They’ve visited this beautiful tropical Shangri-la, fallen in love with it, and now want to start a life together. But how do you buy a property if you don’t have the cash? Financing seems the obvious answer. But is financing property in Costa Rica an option? There’s good news and bad news. Let’s get the bad news out of the way first.

Getting a Costa Rica Mortgage

Obtaining a mortgage from a Costa Rican lending institution is a long shot. If you’re not a Costa Rican citizen or legal resident, your chances of being approved for a loan are next to nothing. If you become a legal resident, it’s possible to get a loan, but the odds are still against you. You may have an excellent credit score in your home country, but it may not satisfy the Costa Rican banks. They may have no way to verify your financial information–income, assets, liabilities, and credit history—because all the financial records are kept in another country where they have no access. For that reason, the local credit unions are reluctant to lend.

Even if you do qualify for financing, you may choose not to borrow from a Costa Rican bank. The interest rates are notoriously high, often double the mortgage interest rates in North America. And to make matters worse, you’ll have to fill out a mountain of paperwork.

Does that mean that you should give up on the hope of financing property in Costa Rica? Not at all. The good news is that there are many other options.

Owner Financing

Some buyers have taken advantage of owner financing to purchase a home or land in Costa Rica. It’s an option worth investigating if the seller is a reputable developer. As always, be sure to enlist the services of a trustworthy real estate agent and lawyer. Some sellers are willing to carry the note for qualified buyers for many years. Other owners might offer a payment plan for a few years with a balloon payment scheduled at the end. The latter arrangement allows time for the buyer to sell another property or take the proceeds from another investment in order to make the large final payment. Well-established escrow companies can protect your interests until the purchase is finalized.

Graphic about bridge financing property in Costa Rica

Home Equity Loan

A second viable option, if you still own your home in North America, is a home equity loan or home equity line of credit. If you’ve built equity in your residence over the years, you have a great source of cash at your fingertips. How much will lenders allow you to borrow? Depending on your income and credit status, as much as 75-90 percent of your available equity. And interest rates are often favorable since your original home serves as collateral.

Retirement Fund

A retirement fund is another useful resource. You may be able to withdraw enough to invest in property in Costa Rica. If you’re from the United States, your 401k or IRA (individual retirement account) can be converted into a self-directed IRA which, in turn, can be used to make your purchase. However, the rules are restrictive, so be sure to consult an expert if you’re considering this option. I can offer companies for you to contact if this is an avenue you want to pursue. I personally have helped over 30 people use a self-directed IRA to purchase property in Costa Rica.

Private Lenders

A less common but still workable alternative is to borrow from a private lender. Each lender has its own list of requirements, and the interest rate may be higher than that charged by traditional lending institutions. But if it makes the difference between getting the home of your dreams and missing out, it’s worth considering.
Just remember one thing, 95% of the time there is a solution to any roadblock, financing the purchase of a property in Costa Rica is possible. Contact me to learn more. These are just some of the many options for financing property in Costa Rica. So what are you waiting for?

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