The majority of the real estate sales in Costa Rica are cash. There are very limited local funding options for expats here in Costa Rica. Before making a decision to purchase property, it’s important to understand which options are available and what they involve.
Secured Financing from Your Home Country
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. If you already own a property, you can consider taking out a home equity loan in your home country to finance your Costa Rican property purchase. Alternatively, refinancing your existing property can provide additional funds for the acquisition. However, it’s essential to assess the interest rates and ensure that the terms align with your financial goals. For this option, you would need to contact your local banks.
Seller Financing
The second best option is to see if the owner of the property that you are interested in, is willing to offer owner financing. In such cases, the buyer pays the seller in regular installments over an agreed-upon period, bypassing the need for a bank loan. Negotiating the terms of the deal is essential to ensure both parties are protected and comfortable with the arrangement. Owner financing typically requires a 50% deposit and has an interest rate of 7-10% for 2-5 years with a balloon payment at the end.
Traditional Bank Financing
Third, there are a few local 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. 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.
Developer Financing
Some property developers in Costa Rica offer their financing options to attract buyers. These arrangements might include flexible payment plans or lower interest rates than what traditional banks offer. While developer financing can be convenient, potential buyers should thoroughly examine the terms and conditions, as they may differ from standard bank loans.
Private Financing
Finally, if you do not qualify for bank financing, private funding may be available at 10-15% interest. These also have fees associated with them, but they offer a faster option. We have a few options available for Private Financing. 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, download this guide.
