Costa Rica has been the equivalent of a buzzword lately. This country in Central America bordered by the Caribbean Sea and the Pacific Ocean is many people’s dream for its impeccable landscapes, well-preserved nature and 800 miles of coastline – who wouldn’t want to live there?!
But buying property is a huge decision. Not only is it a life-changing moment, if you’re buying a house that will become your family’s new residence, it is also perhaps the most expensive endeavor you’ll have to deal with for a long, long time. But even if your plans are something other than settling down in this sunny country, buying a property in Costa Rica can be an amazing investment. Not only are property prices expected to rise further, providing you with good resale opportunities, but Costa Rica is also undoubtedly a popular holiday destination, especially with the rise of eco-tourism, so even renting out your property can be a good idea.
In any case, the way you decide to finance this project will hugely affect your life in the future. Therefore, you need to do extensive research and find out as much as you possibly can about home loans in Costa Rica. We’re here to tell you some important tips, so stay tuned.
The Basics
Firstly, there are a few things about Costa Rica that ambitious home buyers should know. The currency used in the country is the Costa Rican colón. The current exchange rate is 603.5 colones for 1 USD and 432.18 colones for 1 AUD. Depending on the lender in question, you might be able to access a loan in U.S. dollars, if you wish to do so. As for looking around for properties, you’re going to need a broker, of course; however, make sure you do ample research and consider your decision well as real estate brokers don’t need to have a license in Costa Rica, meaning that some might not be as good as you’d want them to be.
Can I Even Get a Loan?
This question is oftentimes asked by non-Costa Ricans. The fact of the matter is that theoretically, you cannot finance a home purchase if you’re not a legal resident of Costa Rica. At least not through the traditional bank loan way. Such a loan – if you can get it at all, since few banks grant mortgages to non-residents – could end up being too costly, with interest rates ranging between 7-10%. Nevertheless, this is still a better offer than what most private lenders would give you. Additionally, some foreign private banks might offer you this option as a foreigner. If you choose this option, it’s important to be familiar with a few terms such as TBP and TPRto get a better picture. If you are having difficulties getting approved or getting good conditions, your best bet is turning to private lenders or alternative ways of financing your purchase.
The Alternatives
The news that you might not be able to get a bank loan is fortunately not the end of the story. The first step is getting your credit score under control. Next, it is a good idea to pre-qualify before you even start looking around for properties. Shopping around is well worth your time as you will find that private loan rates are around 10-18%, so you really want to get the best possible deal. Try to find lending platforms that will simplify the process of comparing your options – much like the people looking for home loans in Australia do.
Besides private loans, other options include seller financing or owner financing (although, here you might need a considerable amount of cash right away and the interest rates are not the best), business lines of credit or HELOC if it is available for you (and if you are willing to collateralize your equity), or you can do a cash-out refinance (again, if you have this option available due to another property you own). Essentially, the important thing to understand is that a traditional loan is not your only option and if you’re resourceful enough, you can save a lot of money that would be poured into interest down the road.
Cash is the Best Choice
There is no doubt that, if you have it on hand, cash is the best way to finance the purchase of your Costa Rican property. Sellers will love the convenience, and they might even be persuaded to give you a better price if you were to pay in cash.
As you can see, purchasing a house in Costa Rica is not an easy matter, nor is it cheap. You really need to consider all the options at your disposal before taking out any kind of loan, be it a bank loan or a private loan, but if you manage to pull it off, you can be sure that your Costa Rican property will yield you the ROI you deserve.