Pay cash or finance?

Cash on the barrel head.

We had to get a mortgage to build our main house. Previously, we’d been badly misled about the cost of building and overinvested in a guest house that would not accommodate our long-term needs. We used two different mortgage brokers here in Costa Rica. They arranged loans (a mortgage and a refinance, that is) with Costa Rican banks.

I’m just not sure what I’d do if I had it to do over again. On the one hand, it would be great to have our cash safe in a U.S. bank and to have the mortgage interest to deduct on our income tax returns. On the other hand, if we had total confidence that nothing bad would happen for the rest of our lives, it would be nice not to have a monthly mortgage payment. I just don’t know . . .

There are a couple of routes you can go.

Stewart Title Co. will take all your financial proofs and send them to a bank in the U.S. which will process them as if that U.S. bank were offering the loan. Once the U.S. bank makes a recommendatio, Stewart will take it to the Costa Rican banks they work with to try to obtain a loan.

You can also use a Costa Rica-based mortgage broker who will handle your application much as a U.S-based mortgage broker would. They’ll gather all your financial information, maybe look at your FICO score, and then try to market the deal to Costa Rican banks they work with.

In some cases, the Costa Rican bank will require that a Costa Rican certified **public** accountant also review your income proofs and verify them. Of interest . . . Costa Rica has both “Public” and “Private” certified accountants. Apparently it’s important to get your verification done by the right one.

Once a bank has tentatively accepted your loan application, there will be an appraisal process to determine if the deal is or will be adequately collateralized. That’s typically done by the Costa Rican architect of the bank’s choosing.

cash is King!!!

all my properties and houses i own have no debt.. and I would rather have my money in homes and properties instead of banks and securities….

*jack, I am a firm believer in building rather than buying an existing house. If you buy an existing house, you are buying what someone else thought they wanted or what someone else thinks you should have. All too frequently, someone else’s ideas do not represent our own wants or needs very well. Often, buyers end up with too much house, too many of the wrong types of rooms, amenities they’ll never use, or amenities they need or want that cannot be easily or economically retrofitted.

There’s an old saying, “If you fail to plan, you plan to fail.” In acquiring a home to live in, nothing could be closer to the truth.

If you take the time to carefully assess your real needs, determine what you can really afford (allowing for significant cost overruns), find a location where you can build that house, and engage a good architect and builder, I believe you’re bound to come out at the end with a better, more livable home. Whether it ends up being cheaper or not is another matter, but if the house isn’t well suited for you, then the price can never be cheap enough.

In the process of thinking through just what you need and can afford, I highly recommend you go to amazon.com and buy a couple of books by the the architect, Sarah Suzanka. One of those is “The Not-So-Big House” in which she advocates building smaller, better-planned and more functional homes. It should be on everyone’s reading list if you’re planning a house.