Buying Property in Mexico

Buying Property in Mexico

Rule #1 Understand the Work of the Notario Publico

The Notario ensures proper transfer of all documents and will draw up and review all of the closing documents including deeds, trust, and registration papers. The Notario also guarantees that the property and the transfer of ownership is done in a manner similar to a U.S. title company because the Notario verifies on the date of deed transfer that back taxes have been paid on the property and that there are no liens or encumbrances against the property.

Rule #2 Understand "The Closing Process and The Closing Cost"

It is going to take between 45-60 days to complete the closing process. Commonly, the buyer pays for the closing costs as well as transfer or acquisition tax. In many closings, it is not necessary for the buyer to be present for the closing. The closing costs are paid on the value of the property purchased. Closing costs are as follows:

Fees for the tax certificate
Transfer tax (I.S.A.I) of 2% plus a fixed amount according to a scale based on the appraised value of the property, this goes to the Mexican government.
A registration fee of .05% of assessed value of the property.
Average of 2% for legal notary fees.
Title search fees
Property Appraisal and miscellaneous office expenses.
Total closing costs varies from State to State because each state sets the amount of taxes. The average in the State of Jalisco for closing residencial properties range from 3.2 to 5.5 % of sales price. Commercial property for new construction may be as high as 8 % because the I.V.A. Tax (a 15% sales Tax) may be included in your closing cost.

Rule #3 Understanding "The Restricted Zone"

In Article 27 of the Mexican Constitution it cleary states, “Foreigners cannot own property within (100) Kilometers of the Border and (50) Kilometers of the coastline”. This is called the Restricted Zone. However, in the 70’s the Mexican Foreign Investment Law created two options that help foreigners that want to purchase property in “The Restricted Zone”.

1. A Mexican Corporation

2. A Bank trust (Fideicomiso)

A corporation

          If you wish to purchase property through a Mexican corporation, it may be 100% owned by foreigners. A provision in the by-laws of your corporation must state that the share holders must accept and will be subject to Mexican laws. You cannot live by the laws of your own country. The property must be registered with Foreign Affairs Registry.

A Bank Trust (Fideicomiso)

          Both foreigners and nationals may establish a Fideicomiso. (An Irrevocable Bank trust). This trust is created with a Mexican bank. The bank accepts the fiduciary responsibilities of a Trustee. The Fideicomiso allows you to purchase anywhere in Mexico including the restricted zone.

          The Notario at the request of the buyer requests that a bank of your choice act as a trustee on your behalf. The bank then will receive a permit to acquire the chosen property in trust. The trust is irrevocable and is established for a maximum of 50 years then it may be renewed for another 50 years. You are the beneficiary of the trust and have all the benefits of direct ownership. This includes the option to sell, remodel, lease, mortgage, or transfer the rights to a pre-appointed heir or another third party. The trust may also include language to by pass the probate court with joint ownership to transfer with the rights of survivorship. You do have the absolute right to transfer the title to another party at anytime.

          Responsibilities of the trustee to the buyer include; exact fulfillment of the trust. Mexican Law also states the trustee will assume full technical, legal and administrative supervision.

          It usually costs approximately $ 800 to $1,200 USD to set up a trust. There is also an annual maintenance fee of $400 to $500 USD. You will pay the yearly fees directly to your bank.

Rule #4 Understanding Your Property Taxes

           Your property taxes may to be low compared to States like California or Texas. The assessed rate is set by each state the same as in the U.S. The range is .04 - 2 per cent . In the State of Jalisco the rate of .08% of the assessed property value which is determined when the sale is made. Example: a $300,000.00 US dollar residential property is a little less than $280.00 US dollars per year. Compare that to what you are paying in your home State and you will see another advantage to owing property and retiring in Mexico. Not to mention lower cost for medicine, medical care, insurance (car and health), food (fresh fruit and vegetables) and clean air to breathe (basic essentials).

Rule #5 Understanding Financing

          Interest rates in Mexico are high compared to U.S. and Canadian rates so most transactions are made in cash. However, there are a few banks that offer mortgages. Some developers do offer financing. We also have U.S. lenders that have money available for U.S. and Canadian citizens. Contact us for more information about current interest rates and required down payments.

We do hope that this information will prove useful during your search for your perfect Mexican real estate vacation home.

Rule #6 Choose a Real Estate Company You Know and Trust!

Buying Property in Mexico

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