Financing is available in Costa Rica but it is a time consuming process that requires a lot of paper work and can become costly. It is very difficult to borrow funds from a Costa Rican bank but there are other options as well.
In general, most buyers who require financing either borrow the money needed in their home country by way of a home equity loan or by finding a property where the owner is willing to do owner financing.
Below is a brief overview of your options in which your attorney will represent you in the process.
You have found your home in Costa Rica but do not have the full amount to cover the cost so owner financing maybe an option for you. In most cases, there is very little negotiating room with the sale price of the home if the seller agrees to hold the mortgage.
Most sellers require 50% of the purchase price as a down payment and will finance the remaining 50%. Loans are normally for a period of 3 to 5 years with the average interest rate anywhere from 6%–9%, depending on the owner, but possibly can be higher. The title of the property will be in your name but there will be a lien put against it and if you default on your payment, the owner will be able to repossess the property. As the buyer, are responsible to the costs in setting up this up with your lawyer in addition to the closing costs. You must consult a lawyer for this cost.
Self-Directed IRA using your 401(k)
If you have a 401(k), it is very easy for you to roll it over to a self-directed IRA without paying early withdrawal penalties or pay taxes. We recommend using NuView who will act as your custodian to your IRA. Most financial advisors will tell you that you cannot use your IRA or 401(k) to purchase real estate and they will try to get you to move money in to a real estate trust or fund. This is normally done because they are unaware of this strategy and there is no monetary incentive for them. NuView will work with you to set up your custodian account with you paying annual fees for maintenance and fiduciary duties
Getting a Mortgage from a Bank
Not all banks will give a mortgage to a foreigner and some banks require that you have already started the residency process or already have their residency in Costa Rica. If you are interested in the requirements needed to begin your residency, please let me know and I can forward you that information.
If you do not have a high credit rating (higher than 720), you are wasting your time and money apply for a loan in Costa Rica. In addition, interest rates vary from bank to bank and can vary from 6.5% up to as high as 16.9% depending on the amount loaned. In addition, most 20 year mortgages are locked in at a set rate for the first three years, and then they turn into an ARM (adjustable rate mortgage) for the remaining term of the loan. The new adjustable ARM could be NY Prime plus 8% and even higher.
Equity Line of Credit
Another option for you to consider is getting a loan or home equity line of credit, or refinance your present mortgage in your home country. Do you have equity in your property? This could be an option to consider but I recommend to check with financial advisor first.
Cash is always the best way to go with the option of getting a better deal with a fast closing.