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getting a loan
 - Costa Rica

Mortgages 101

Mortgages 101

With the right lender, financing is a simple and straightforward process designed to deliver maximum benefits at minimal cost. 

Choosing the Right Mortgage

Shop around to find a mortgage that has a low interest rate and requirements that you can fulfill. The key to choosing the right mortgage is to select a loan with terms that best fit your lifestyle.  Do not overextend yourself and commit to more than you're able to afford.

Common Mortgage Terms & Interest Rates

Mortgages through local government-owned or private banks usually carry interest rates of 7-10% over 15-30 years. You will be required to put a minimum of 15% down, though 20% is a more common requirement for a primary residence. A minimum 35% down is required for secondary homes and lots. Financing is available in U.S. dollars or Costa Rican colones. Non-residents can secure mortgages for up to 25 years with private banks, and up to 20 with state banks.

Land vs. Home Loans

In Costa Rica, mortgage loans for primary residences offer more flexible terms, including financing for 25-30 years and a minimum down payment of 15%. Land and secondary home loans are stricter, and often require at least 35% down over 15 years or less. Interest rates are similar, and loans may be disbursed in U.S. dollars or Costa Rican colones.

Financing Options in Costa Rica

A cash purchase affords you big bargaining possibilities and is the easiest and most hassle-free way to pay for your home in Costa Rica. If you do not pay with cash, you have the following financing options: 

  • Home-equity loan: You may take a home-equity loan out on your primary residence. This allows you to approach a Costa Rican real estate purchase as a cash buyer. 
  • Owner financing: Some homeowners may be willing to finance a partial loan on their home. Advantages include lower closing costs, a quicker sale, and negotiable terms. Beware of sellers charging above-market interest rates, improper paperwork (run everything by your real estate lawyer), and tough requirements like short loan terms and balloon payments.
  • Bank financing: Costa Rican banks offer financing to residents and non-residents. Requirements include a current account with the bank, income verification, a national and/or international credit check, and a bank-sanctioned home appraisal (paid by the borrower). Local mortgage terms are not as advantageous as those in the United States due to higher interest rates, large down payments and shorter loan periods. Loans take up to three months to process.
  • Mortgage broker: Mortgage brokers are a recent addition to the local market, allowing buyers to finance through international lenders. You will be required to provide U.S. tax information, income reports, and a credit check. Depending on your credit score and other information, you may have lower interest rates and a faster loan approval. 

Early Payoff on your Mortgage

Paying off your mortgage early can save you tons of money in interest payments. Ask your lender if there is a penalty for early payoff. Start by tacking a small amount onto your existing monthly payments; an even easier way is to move to bi-weekly payments. Since most months are longer than four weeks, bi-weekly payments add an extra payment each year. Finally, make lump-sum payments whenever possible. Any reduction in loan principal will save you money in the long-term. 

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