Costa Rica Mortgages – The $325K mortgage story. Part 1.

As you will know from our previous article – ‘Costa Rica Mortgages – Expensive from start to finish‘, – an important investment client of mine asked me to help him to choose which Costa Rican bank would offer him the best mortgage terms to buy a new home here.

Please note that my client and his wife are legal residents of Costa Rica.

Costa Rica Mortgage Hunt:

We decided to start our Costa Rica mortgage research online the same way that most people do these days.

My assistant Gabriel supplied us with the email addresses of the managers of the mortgage departments in all of the major financial institutions in Costa Rica and I emailed (in Spanish) all of them.

If they did not reply to the first email, I emailed them twice again over a period of two weeks before striking them off our list because they failed to reply. Not replying to emails or telephone calls even when there is huge money to be made by them is common in Costa Rica.

In a country where banks will take 2% – 3% ‘commission’ of the mortgage amount, we were astonished that many of them didn’t even bother to return our emails about a $325,000 mortgage over a 25 year period.

After this preliminary email contact, we were left to analyze more carefully the mortgages offered by five of the most solid and established banks in Costa Rica, two of whom I already do a lot of business with and we discovered that the differences in their terms are huge.

One Costa Rican bank offered a mortgage with fixed interest (over the first five years) at 7.75% one at 9% one at 9.25% and another at 10.25%. On a $300K mortgage that difference of 2.5% per annum is an enormous sum of money.

And according to BankRate.com, the average 30 year fixed rate mortgage in the USA (February 2007) is just 5.75% and in case you ask, there are no “interest only” mortgages that I know of in Costa Rica.

Based on a series of emails explaining their basic terms and conditions, our choice was quickly and easily whittled down to a choice between Banex and BAC San Jose.

Applying for a Costa Rica Mortgage – Proof of income:

The banks obviously want to know that you have the money to pay the mortgage so the first step is to complete the application forms that should clearly show much you earn and what property you intend on buying.

The gentleman from BAC San Jose was kind enough to meet our client at a convenient location – the coffee shop in MultiPlaza – and he sat there and filled in the entire set of mortgage application forms and our client only had to double-check them for accuracy and then sign them.

Unfortunately Banex preferred that our client visit them in their offices at time more convenient for them and expected the client to complete all the forms. They also had more forms and also expected our client to produce far more legal documents certified by an attorney showing his legal ownership in three different Costa Rica companies that he is involved with.

Strangely enough, although BAC San Jose said that these forms were mandatory, BAC San Jose never requested them and after BAC San Jose approved of the mortgage on a preliminary basis before doing the evaluation, Banex then also approved of the mortgage without my client supplying those documents.

Our client can show a $100,000+ annual income in Costa Rica so we didn’t think there would be too much of a problem and a Costa Rica CPA must certify this ‘proof of income’ letter and put all those lovely official stamps on it before submitting it to the bank.

Costa Rica Mortgages – Medical Tests:

As a ‘temporary’ legal resident, we were told that banks would not pay for the medical but they assured us if the client had been a ‘permanent’ resident, that they would have paid for them.

Unfortunately Banex required their medical tests done for the local insurance company INS, but BAC San Jose used a different insurance company out of Panama so the tests and the forms were different and that meant two examinations, two sets of forms and of course double the expense.

But since the two full medical examinations (including two EKGs) only cost US$225 I figured that it would be worth going through the process because we might be able to play one against the other.

The medical tests were quite comprehensive consisting of a full medical examination with a trained Cardiologist for the EKG and at the same time and in the same room, a female Doctor who whisked through an enormous, multi-page form asking a lot of questions. A urinalysis was also required which unfortunately showed an elevated level of cholesterol in an otherwise extraordinarily fit man.

At the ExpoConstruccion, both banks were exhibitors and both banks assured us that they would definitely be offering the best deal and Banex ushered out there Mortgage Manager who asked when our client would be signing the papers. “Whatever you do, don’t make a decision until you have checked with us.”

What House Are They Buying?

The brand new Santa Ana home they are buying is two storeys 300M2 or 3,228 square feet with three large bedrooms, four bathrooms, spacious living room that leads out onto a very attractive terrace and the garden plus dining room, a large kitchen, an office plus laundry room and a maids quarters with bathroom.

The sales price was US$330,000 but because this is a very special client of mine and since the developer is also a personal friend of ours, sales commissions were not charged and the client only paid US$310,000.

To put this US$ sales price into perspective for our non-US readers:

• US$310,000 = $350,670 Canadian dollars
• US$310,000 = £155,512 British pounds
• US$310,000 = €227,514 Euros as of early March 2007

You can read the conclusion of this Costa Rica Mortgage application process here.

Written by Scott Oliver, author of How To Buy Costa Rica Real Estate Without Losing Your Camisa and Costa Rica’s Guide To Making Money Offshore.

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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.