Historical records show that mortgages have been around for centuries in Costa Rica but it is not until recently that banks and financial institutions have begun to open up home financing opportunities to both citizens and foreigners. Not that many years ago the only option for foreigners to close a real estate deal in Costa Rica was through cash at closing.

This financial environment for the acquisition of property lasted until the Latin American debt crisis finally found its way to Costa Rican shores. Sellers stopped offering owner financing to expats for fear they would not be able to hold up their end of the bargain. Should this happen the occupant would enjoy years of rent free living due to lengthy and expensive court cases, making this type of transaction a high risk enterprise whichever way you looked at it. In fact, this type of situation can and still does occur.

Property acquisitions during the debt crisis were easy and fairly straight forward for cashed up foreigners with enough dollars to throw around. The state of the market allowed anybody with even a modest wad of cash to snap up properties free-and-clear at bargain basement prices. It wasn’t until Costa Rica clawed its way out of the devastating effects of the cash crisis that things began to change, and real estate began to escalate in value.

Expats or real estate investors can generally expect 50 percent down and a ten-year settlement for the unpaid balance with amortized payments at an agreed interest rate when purchasing property in Costa Rica. If you have the right contacts — such as a real estate agent or attorney practicing property law in Costa Rica – this type of arrangement can even be fairly easy to come by. While usury is frowned upon buyers and sellers are otherwise free to come up with their own mutually satisfying agreements.

During the last couple of decades Costa Rica has been enjoying the rise of a middle and consumer class which has led to the need for a viable mortgage market. However, Cost Rica is a social democracy; a political climate which provides government sponsored social programs such as free land for financially challenged families and savings bonds. A climate such as this has made it particularly challenging for a mortgage market to emerge. Despite these challenges, and as recently as 2013, the mortgage market has managed to accelerate, with both private and state banks now making mortgage financing available to those willing to go through the sometimes rigorous application process.

While the Costa Rican mortgage market is only just now starting to see its potential there is still quite a lot of bureaucracy and red tape to wade through for the average mortgagee wannabe. While these bureaucratic systems are fairly ingrained they do come with the same basic guidelines as what one would expect in Canada or the United States; such as commissions paid to the mortgage lender, agreed percentages, and floating interest rates adjusted according to the prime rate. Unfortunately, interest rates in Costa Rica are exorbitant; typically, twice what you would find in the states. Needless to say this can add quite a few zeroes to the fully realized payout value at the end of the mortgage’s life.

Acquiring a mortgage can be quite the ordeal in Costa Rica, especially for foreigners who are not legal residents. One bank even requires these non-resident foreigners to have a robust life insurance policy, complete with a detailed medical diagnosis that includes, EKG, fasting glycemic test, and urine and blood analysis. Despite a somewhat hostile market for foreigners, interest in Costa Rican real estate is still on the rise. This can only be a good thing for the mortgage market when the Costa Rican banks finally realize the golden opportunity they have been given.

Written by Scott Oliver, author of 1: How To Buy Costa Rica Real Estate Without Losing Your Camisa, 2: Costa Rica’s Guide To Making Money Offshore and 3. ¿Cómo Comprar Bienes Raíces en Costa Rica, Sin Perder Su Camisa?

Andrew Makarik

to@welovecostarica.com

Andrew Makarik is the main editor of WeLoveCostaRica, a fan of this sunny country. He is also a loving husband and a has a lovely daughter. By being a devoted family man and the biggest Costa Rica fan, he wants to make more people feel at home there. WeLoveCostaRica unites people and helps them find new home or a new travel destination. This website is a friendly community where everyone can find not only information, but also new friends and travel pals. Andrew is also passionate about IT and programming, so he himself maintains a friendly atmosphere in this cozy environment of WeLoveCostaRica.com.