If you’ve been thinking about buying a house in Costa Rica, one of the most common concerns is the availability of financing. When considering how to buy property in Costa Rica, it’s crucial that you think about how you are going to finance the purchase. While many of the resources out there can be incredibly overwhelming to read, today we’re going to break it down to help you understand the Costa Rica real estate financing market and what assistance is available for the upcoming purchase of your dream home. Although financing property in Costa Rica is not the norm, many seller’s can accommodate a financing deal.
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How to Buy a House in Costa Rica – Can a Foreigner Purchase Property Here?
Foreigners are offered the same rights as citizens in Costa Rica when it comes to purchasing real estate. Whether you are a Costa Rican resident or a non-resident, you’ll be able to own and purchase land in Costa Rica legally. You won’t be able to vote in elections here if you are a resident or non-resident, but otherwise, your rights remain the same as citizens. There are a couple of exceptions to this rule, which are to be expected when buying land in a foreign country. You can’t own a property in a Maritime Zone in its entirety, and you also can’t own INDER property, which is saved for poor farmers in the country. Most property that you buy in Costa Rica will be titled, and title insurance is available if this is something you want to purchase with your new home.
How to Buy Property in Costa Rica – Financing Options
As a foreigner, there are a few good options when it comes to financing your house in Costa Rica. Of course, this is a very personal decision and will depend on your current financial situation. Consider these four options carefully in order to see which would be the best solution for your upcoming property purchase in Costa Rica.
Local Banking
In Costa Rica, you’ll find that there are public and private banks. As far as the public banks, these are owned by the government, and most foreigners will find themselves considering using Banco de Costa Rica or Banco Nacional for real estate financing. Private banking is a newer option in Costa Rica, and it only came into law in 1996. They are now allowed to offer mortgages to foreigners, and you’ll find these are some of their most popular services.
The largest private bank that many foreigners use is BAC San Jose, however, you’ll also want to check out HSBC, Scotiabank, and CitiBank. Even during the recent pandemic, you’ll find that they are still willingly offering mortgages to foreigners, and they make it much easier than you might expect to secure a mortgage when you are considering how to buy property in Costa Rica.
Local Mortgages
When working with a developer or real estate agent from our team, you’ll want to consider finding out about any relationships they have with real estate financing companies. Pre-approved financing is very beneficial for foreigners, and it will ensure you have the funds secured for your purchase. You’ll be in good hands with this type of mortgage, as they will have already checked out the title search, structure, and value of the property, so you’ll know your purchase is a good one from the start. One thing to consider about local mortgages is that they often raise their prices for foreigners. This is a good option when you are buying from a developer, but otherwise, we encourage you to shop around at other banks and see which products are available to foreigners.
Foreign Mortgages
Finally, the other option you’ll want to consider is securing a foreign mortgage. If a bank isn’t based in Costa Rica, they can’t advertise this service, however, many foreign banks offer this service to anyone considering buying a house in Costa Rica. This is a completely legal route to take, and you’ll find they are generally well aligned with the terms you might see in the United States. Start speaking to your local bank and other branches where you live, and see if they offer specific programs for overseas investments. If they don’t already have a program set up, they may still be willing to finance your purchase. The process should be very similar to buying a property in your home country, with a credit score, income, and asset check.
Costa Rica Real Estate Financing Through Sellers
Financing property in Costa Rica is usually done directly through the seller. Sellers offering financing in Costa Rica also tend to be quite flexible with the documentation you will need. Usually, the seller offers to finance only to help the sale of his property and generally would prefer to have a cash sale. Some request proof of income, others do not. Typically owner’s financing is for 1-3 years at an interest rate of 6-9%, with a +50% down payment, though this of course varies.
Working with a Real Estate Attorney
When it comes to purchasing a property in Costa Rica, one of our top pieces of advice is to hire an attorney to assist with the process. Try to find one who is bilingual and also specializes in real estate. This will make the communication process much easier for everyone involved, and there are many well-experienced attorneys who are used to working with foreigners. Ensure they are approved by the SUGEF for their escrow account or that they use a title company. This will ensure that you don’t face any legal troubles during the process.
Making an Offer on a Property
After learning about how to buy property in Costa Rica, we hope you’ll be nearing the stage where you’ll be ready to make an offer on a property! You should always avoid making verbal offers, and instead, get our team to create a written offer to take to the seller. Once the offer is accepted, you’ll use your lawyer to create a purchase-sale agreement, which you and the seller will both sign. At this stage, you will usually be expected to wire about 10% of the sales price into escrow with the help of your attorney. Remember, the sale won’t be legal until this money has been deposited, but you can still do this once you return home if you didn’t prepare for this before your visit to Costa Rica.
Closing the Sale
If you’ve made it this far in the process, you are nearly the proud owner of a property in Costa Rica. Make sure you deposit the money and legal fees well in advance of the closing date. Banks in Costa Rica can hold the money for a few days, which could delay the process and pose considerable risks to your money. You’ll also need to do this to ensure you are in compliance with money laundering laws, which may be different here to your home country. Also, ensure you send the “Get to know your customer” with the help of your real estate attorney in plenty of time so that you won’t have any issues with the documents that need to be processed to close the sale.
There are many different financing options when it comes to discussing how to buy property in Costa Rica, but it’s all about finding the one that’s most suitable for your current financial situation. Costa Rica is an excellent country for foreigners to invest in, which is why it’s attracted so many overseas buyers in the past decade or so. You’ll find that there are properties available for all budgets, and whether you are looking to invest in a vacation rental or a second home for your family, you’ll find something to suit your needs. For more information about the Costa Rican real estate market and financing, don’t hesitate to contact our team at Tamarindo Real Estate.
