The first thing you should know as a foreign real estate buyer about
closing costs in Mexico is that closing costs are relatively high, even
for Mexican citizens. This is especially true for those financing their
properties. But don't let that scare you. Taking a step back, a
few extra percentage points really have little weight when one
considers that in Mexico, you can get three times the home for half
the price and sun all year around.
For cash transactions, closing costs include a trustee fee, insurance,
a tax appraisal fee, an accusation tax as well as a number of smaller
fees. For those financing, add to these costs a title search, title
insurance, escrow fees, various loan fees, and a U.S. market appraisal.
Prospective buyers, whether financing a property or paying cash, should
always remember to take into account the closing costs as well as the
purchase price and down payment. Typically, you will need 20% or 30%
in down payment down plus the closing costs. If you want to buy a $100,000
property, you’d likely need a minimum of $30,000. Interest rates
have really come down on
mortages
in Mexico however and they are now comprable to U.S. mortage rates.
If you’re paying cash, there are several stops (and fees) you’ll need
to contend with.
(1) Registro Nacional de Inversiones Extranjeras (RNIE) is essentially
the registration of the deed (escritura pública) through the
Commerce
Department or more specifically, the Ministry of Foreign Investment.
Your trustee (a Mexican bank) is responsible for completing this step
within 30 days after the title transfer has been approved.
(2) Assorted Notario fees. A mexican notario is a highly esteemed, and
usually wealthy, public records keeper. Notarios are the guards at the
gate as well as the lords of the manor when it comes to real estate
transactions in Mexico and they do most of the serious work which includes:
(a) Securing the Permiso de la Secretaria de Relaciones Exteriores
(SRE) which is your permit from the Ministry of Foreign Investment
to undertake the transfer.
(b) Collecting and paying (without adding a surcharge) the Impuestos
Sobre Transmision Patrimonnial (ISAI) which is a state tax which
runs between 2% and 3% of the sale price of your property.
(c) Processing the Registro Publico de la Propiedad (RPP) which
is a local permit required for the transfer.
(d) Issuing the Certificado de Libertad o Gravamen which is
a certificate that states that the property is free of liens.
This certificate is good for 30 days. If the real estate transaction
is not completed within this time frame, a new certificate must
be issued (and a new fee charged).
(e) Also a Avaluo y Deslinde takes place. This is an appraisal
of the property for tax purposes. This has nothing to do with
the appraisals for loan purposes. The government may decide
to perform a pop appraisal of the property after purchase. If
the appraisal value is greater than 10% of the price you paid
for it, you will be responsible to pay a 20% tax on the difference
between the two amounts. This sum is due within 15 days of the
date of the appraisal report. This is very rare, but it’s a
good idea not to let the seller try to fudge things to save
on taxes. |
Though notario fees vary from notario to notario, they cannot charge
more than the max fees as outlined by state law.
(3) If you plan to live in the restricted zone, a Fedeicomiso en
Garantia must be set up. A fideicomiso is nothing more than a legal
trust held by a trusted financial intermediary, typically a bank,
that confers upon its beneficiary every single right that any Mexican
owner has when they own a property (including improving, selling, renting,
passing on in a will, etc.) except actually holding the title in their
name. This is a one time fee. It also carries an annual fee that must
be paid in advance, so the first installment is due at the time the
trust is set up.
Note: The “Restricted Zone” is a strip of territory one hundred kilometers
wide along the borders and fifty kilometers wide along the coast.
If you don’t live in the Restricted Zone, a fedeicomiso is not necessary.
You can title the property directly in your own name. The one advantage
of a fedeicomiso, however, concerns inheritance of the property
in the event of the death of the owner. A fedeicomiso requires a named
beneficiary and so there is no question about who will become the lawful
owner.
(4) Escrow Fees – an escrow account is typically set up with instructions
on how funds are to be disbursed. A title company is required to set
up an escrow account as agents are normally not permitted to maintain
escrow accounts for their clients.
Stewart
or
First American
Title are the two most widely used. Closing costs as well as the
purchase ammount are both placed into escrow. Escrow
is not necessary, but it is essential if you want to be sure you moey
is safe. Escrow fees are paid by the buyer.
If you are planning to finance, several more items will likely be necessary:
(5) Title insurance is generally required.
(6) A title search by a title company. This fee will depend on
the title company.
(7) A U.S. market appraisal will be required.
(8) Loan origination fees are paid to the lender.
Closing costs generally run between 7% and 10% of the purchase price
and it is customary that the buyer must pay for everything except agent
fees which are paid by the seller.
