Before you start shopping for your dream property, it is a good idea to make some preparations. Figure out what you are looking for and how you can best afford it.
What is your Dream Wish List?
Make notes to share with your real estate agent on your ideal property. Is it a Villa? Home? Condo? A Lot? A Farm? Something Commercial? What are the key features you would like to have with this property? What size are you hoping for? How many bedrooms and bathrooms do you need? What size land do you want? What type of view are you dreaming of? Do you want a pool? Start thinking about what you will be doing while you are living at this property? Set your budget. How much can you afford to spend on this property?
Figure Out Your Finances
Determine how much cash you have available for this purchase. 95% of real estate transactions in Guanacaste, Costa Rica are cash transactions. If Buyers need funds to purchase a property in Costa Rica, there are 4 different funding options to investigate.
The best and most affordable option for financing would be to secure the funding from your home country; through a home equity loan, second mortgage, line of credit, personal loan, etc. For this option, you would need to contact your local financial institutions.
The second best option is to see if the owner of the property that you are interested in, is willing to offer owner financing. Owner financing typically requires a 50% deposit and has an interest rate of 6-10% for 2-5 years with interest only payments and a balloon payment at the end. Each owner will have specific requirements. There are government and lawyer fees to register a loan in Costa Rica and there are fees to remove it from the title once it has been paid.
Third, there are a few local Costa Rican banks offering financing for foreigners: Lafise, BCT, and BAC. At this point, you must be approved for the loan which requires an almost perfect credit score and an in-depth study of your finances, and then the property you want to purchase must be appraised and approved. The process can be lengthy and costly. Currently, it will cost you approximately 8.5-10% interest plus 4% of the loan value in fees. There will be government and legal fees to register the loan and fees to remove the loan off the title once paid.
In Costa Rica, both the person who is getting the loan and the property they are getting the loan on need to be approved. If going through a local bank, this can be a lengthy process so it is important to start this process as soon as possible and work on getting yourself approved first and know how much money they will lend you. Depending on the loan amount, the lending bank will ask you to get a health exam in Costa Rica (you must be in the country for this exam) and apply for local health insurance. You must be approved for this health insurance and be willing to pay the monthly premiums in order to qualify for the loan. The banks will also require you to have approved property insurance on the property so it is important you understand all of the fees.
If you are interested in this option, reach out to us and we will connect you to the different financial providers.
Last, if you do not qualify for bank financing or do not have time to wait for bank financing to be in place, private funding may be available at 10-15% interest. These also have fees associated with them. This is a faster option. We are part of Quatro Legal’s Realtor Hub and our clients have preferential access to bridge loans of 1-3 years with an interest rate of 10-12%. The areas we specialize in have been pre-approved. This is a 20 day process. For more information, reach out to us and we will connect you to their lead loan manager.
Build Your Green File
A green file contains all your important financial documents. You will need it to open Escrow and to secure financing for your property, should you need to go that route. The typical green file should contain:
Financial statements
Bank accounts
Investments
Credit cards
Auto loans
Recent pay stubs
Tax returns for two years
Copies of leases for investment properties
401K / RRSP statements, life insurance, stocks, bonds, and mutual account information.
Check Your Credit Rating
Your credit score will have a huge impact on what type of property you can buy, and at what price. It is first recommended to check your credit rating with an experienced lending institution so that we can determine what you can afford. The lender will research your credit ratings from the three credit reporting agencies Equifax, Experian and TransUnion.
Come prepared knowing your budget for your dream property in Costa Rica.
Before you start shopping for your dream property, it is a good idea to make some preparations. Figure out what you are looking for and how you can best afford it.
