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Lending Information
 Conventional Costa Rica Real Estate Financing has become a fairly recent innovation in Costa Rican Real Estate sales circles. At one time this was a non-existent issue. That time was less than 10 years ago, but now, the tide has turned and there aren't very many people who are excluded from the buying fever. There are even US based financial institutions and banks that will make loans on Costa Rica Real Estate located in Costa Rica and other foreign countries. This article will discuss loans available to ex-pat residents of Costa Rica and non-residents alike. Developers financing programs will be briefly touched on, but this article is for the main purpose of educating the most frequent buyer of Costa Rica Real Estate Financing, which is the individual homeowner, investor.
At the present time, in Costa Rica most major lenders are banking institutions or private mortgage brokers. The preponderance of private brokers located in Costa Rica, are using US lending institutions and as a result abide by the Equal Housing guidelines set forth by the US Federal Government. The loans that are available are for full time private residences, vacation homes, rental property for investment purposes, the purchase of residential land for construction and even the use of refinance monies, to pay off personal debts. Each local institution seems to work with a different formula for determining the length of the loan (mortgage,) the terms that are applicable, like term (duration), interest rate, rate spread, if variable, closing costs, and numerous other fees and time tables that go along with the financing industry.
Some of the financing plans that are offered to resident buyers are as follows:
 All of the private mortgages that are being made available to residents and non-residents alike, are in US dollars. There is financing up to 85% of the purchase price for personal residences and up to 70% for rental properties or second (vacation) homes. These maximum amounts apply to Costa Rican residents, only. For non-residents, the loan value is 70% for owner occupied and 60% for investment properties or second homes. The loan terms can go as long as 30 years in the case of resident applications and 25 years for non-residents who apply. Interest rates are based on the standard that they are tied to and in most cases are reviewed quarterly and adjusted according to the prime rate, which is usually either the New York prime rate or LIBOR index.
For the purchase of an existing home or for the cost of constructing a new home, some Costa Rica Real Estate Financing options are as follows:
- Option number 1: 8.75% adjustable with a front end fee of 3.50% of the loan amount.
- Option number 2: 9.00% fixed with a front end fee of 3.50% of the loan
The adjustable mortgage rates can change quarterly based on the New York prime rate or LIBOR, and fixed mortgages for 1, 2, 3 or 5 years can also change after their fixed term, based on the New York prime rate or LIBOR plus 2.50%. If you are borrowing what is considered a jumbo loan or over $200,000, the rate will be increased by an additional 0.25%.
 Another little known, or utilitized Costa Rica Real Estate Financing approach to purchasing Costa Rica Real Estate Financing, is the use of your IRA funds that can be invested directly into a home or land in Costa Rica. This is perfectly acceptable and legal, as long as you adhere to the rules that have been developed and are regulated by the US Internal Revenue Service. One thing that must be stated up front, is that the companies that are approved by the IRS, have to be in compliance with the rules because they will ultimately be considered the trustee or administrator of your funds. Therefore, you must work with a company that is allowed to administer self-directed IRA accounts.
The best way to incorporate the use of an IRA account in the US, is to create a Costa Rican corporation or an S.A. (Sociadad Anonima) which has the IRA as its owner. You and your appointed officers would then be the corporate body of this entity, who would buy and sell the real estate through the corporation. The only asset that the corporation owns would be the Costa Rican real estate.
Developer financing programs are a bit different, in that they are designed to accomplish more than one goal. With financing in place, developers can then offer their own financing to prospective investors, thereby boosting the amount of sales in their respective projects. In essence, the developer becomes the banker, which creates an situation where no clients need to be rejected for available financing, with far more flexibility than any banks can offer.
In conclusion, the final topic that needs discussion, when contemplating a financial investment of a sizable magnitude in Costa Rican real estate prroperty, is the availability of good Trust and Escrow services. At the present time, a few exist in Costa Rica. There are two, well known Escrow companies and most trust services can be performed by a reputable financial service organization or your attorney. The potential buyer or developer should also be aware of the need for a good accountant who can come up with accounting solutions for preparing loan documents, such as creating financial statements or varifying bank deposits or debts. Yes, Costa Rica Real Estate Financing in Costa Rica has changed a lot, making it much easier for those who wish to live, retire or invest in this popular, tropical democracy a reality.
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