Why Is It That U.S., Canadian and other International Banks Cannot Fund Mortgage Purchases in Mexico?

by Enrique Saldana (Sept. 2013)

The first question I get when someone contacts me regarding a mortgage in Mexico is:

What is the best deal I can get in terms of interest rates?

People seem to think that banks in Mexico operate under the same lending policies US and Canadian banks do, though that is not exactly the case. Mortgage interest rates in Mexico do not move according to a central bank’s daily adjusting of the interbank interest rate. And even though the banks get the benefit of such interest rate fluctuation, they do not transfer that benefit to the client.

Therefore, each bank bases its interest rates costs on the "Supply and Demand Theory," and applies those rates that are “competitive” according to what the other banks, and thus their competition, offer.

Consequently, mortgage interest rates in Mexico do not have the flexibility, or the mobility, as interest rates in the US and Canada.

As of right now, the best rate you could obtain for a mortgage loan is 8.49% on a 15 yr. term. And this might be the lowest mortgage loan interest rate Mexican banks have had in a long time, if not ever.

The second question I get is:

Can I use my US/Canadian Bank or a bank from the USA and/or Canada to obtain a loan in Mexico?

The answer is NO. Why? Because a US or Canadian bank will not be able to record the guarantee/collateral (deed) in Mexico to the extent that they can guarantee the repayment of the loan.

During 2007 we saw a number of USA "banks" offering mortgages in Mexico, banks such as: Colonial Ntl. Mortgage, IMI, GMAC, GE Money, etc. Most of these lenders, in the US and Canadian sense, were intermediaries for GE Money. Therefore, when GE Money closed their USD mortgage loan department in Mexico, most of these lenders closed their doors as well. In other words, GE Money, through their GE Mexican operation, was funding the USD Mortgage Loans most of these lenders were promoting.

Later came BBVA Bancomer which, through their Laredo Ntl. Texas Bank acquisition (becoming Compass Bank thereafter), also promoted USD loans for a while, and then came Scotiabank, through their Mexican Bank Subsidiary operation.

But because none of these institutions was legally able to record the collateral in Mexico, and thus have legal recourse in the case of default (foreclosure), they ended up withdrawing their mortgage lending. And this is the reason that keeps US and Canadian banks from being able to fund mortgages in Mexico today.

At the present time, the problem of having US or Canadian banks fund property in Mexico still prevails. Only Mexican banks, those that have taken the initiative to provide funding for foreign nationals to purchase property through a Peso Loan program, provide such funding.


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