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Expats and Mortgages in Costa Rica: How to Buy Your Dream Home in Costa Rica

Last updated on September 21, 2023
mortgages in Costa Rica

¡Pura Vida! Living in Costa Rica, with its tropical climate, beautiful landscapes, and laid-back lifestyle, has attracted many foreigners and expats over the years. However, settling down often requires understanding the intricacies of local real estate and, in particular, mortgages in Costa Rica. 

So, do mortgages exist in Costa Rica? 

Absolutely! While not very common… and maybe not the best route to take financially, there are options. And, just like in other parts of the world, there are procedures and requirements to get one. Let’s delve into the specifics.

Mortgages in Costa Rica: An Overview

Yes, mortgages exist in Costa Rica, and they function similarly to those in North America and Europe. The most significant difference is that interest rates tend to be higher. While interest rates in countries like the US or Canada can be as low as 2-4%, in Costa Rica, rates generally range between 7-10%, although this can fluctuate.

Banks vs. Private Lenders in Costa Rica

Banks: Costa Rica has both public and private banks. Public banks, like Banco Nacional and Banco de Costa Rica, are typically more bureaucratic and might require more paperwork. Private banks, such as Scotiabank or BAC San José, can sometimes offer a smoother process for expats, albeit at sometimes higher rates.

Private Lenders: If the traditional banking route proves challenging, some turn to private lenders for home loans. These are individuals or companies willing to finance your property. However, be prepared for even higher interest rates and shorter terms.

Requirements for a Mortgage in Costa Rica

Expats will find that getting a mortgage in Costa Rica may be a lot more difficult than in their home countries. Typical requirements include:

Proof of stable income: This can be from a job, pension, or any other steady income source.

Local credit history: Some banks might require you to have a local credit history, which can be a challenge for newcomers. You can start building this by opening a bank account and using local credit card services.

Legal residency: While not always a strict requirement, having legal residency can make the process smoother. Some banks might offer mortgages to non-residents but at higher rates and stricter conditions.

Down payment: Typically, banks will finance up to 70-80% of the appraised value, meaning you should be prepared for a 20-30% down payment.

Property appraisal: The bank will want the property to be appraised by a professional to determine its market value.

Documentation: Expect to provide personal identification, proof of income, and details about the property.

The Application Process

Pre-approval: Before house hunting, it’s wise to get a pre-approval from the bank. This gives you an idea of how much you can borrow and shows sellers you’re serious.

Property Selection: Once you find your desired property, you’ll need to negotiate the buying terms and price.

Documentation Submission: Provide all requested documents to the bank. The more organized and thorough you are, the smoother the process will be.

Appraisal: The bank will commission an appraisal of the property. If the appraised value is lower than the asking price, you might need to renegotiate the price or cover the difference.

Approval: After evaluating your financial health and the property’s value, the bank will approve or deny the loan. If approved, you’ll get the terms, including interest rates and duration.

Closing: With an approved mortgage, you’ll proceed to the closing, which in Costa Rica involves a notary. They’ll handle the legalities, register the property, and ensure funds are transferred appropriately.

Special Tips for Expats

Consider Renting First: Before diving into buying, consider renting in your desired area. This gives you a feel for the community and ensures you’re making a sound investment decision.

Hire a Local Attorney: An experienced local attorney can guide you through the process, ensuring that all paperwork is in order and that there are no legal issues with the property.

Negotiate Interest Rates: Just because a rate is presented doesn’t mean it’s set in stone. Especially with private banks, there might be room for negotiation.

Stay Patient: The process can be slow, often taking months from application to closing. Patience is key.

While getting a mortgage in Costa Rica might be more challenging than in some expats’ home countries, it’s far from impossible. With the right information, guidance, and patience, you can secure financing for a home in this tropical paradise. Remember to do thorough research, seek out expert advice, and always be prepared for the unexpected. After all, embracing the unexpected is all part of the Costa Rican experience! ¡Buena suerte! (Good luck!)