Life in paradise is within reach… if only you could count on Costa Rica real estate financing? Then, great news! Your dream may be closer than you think!
If you’ve been doing some research, you might have encountered mixed messages: some say financing here is nearly impossible, while others suggest there are plenty of options. The truth lies more with the latter, though with a few caveats. (To be fair, the former was true over a decade ago.)
As of mid-2024, securing home financing in Costa Rica is absolutely possible, even for non-residents. However, it may not be as straightforward as you’re accustomed to, partly due to Costa Rica’s love for paperwork (no one like it but we have to put up with it) and partly because you might not have established the same financial history here as you have back home.
Fortunately, things are evolving. Several banks now offer financing for non-residents, meaning they’re equipped to assess your employment history, proof of income, and credit score, even if your financial background is abroad. This is a significant and positive shift for Costa Rica real estate financing, opening up opportunities for those who have lived or banked outside the country.
So, let’s dive into your options! And if you want to learn more about financing via a home equity loan in your home country or via a self-directed IRA, please see our previous home financing post from 2022.
Home Financing Options in Costa Rica
Let’s acknowledge the elephant in the room: Navigating the world of home financing can be complex, even in your home country. That can be even more true when you’re looking to purchase property abroad and navigating banking terminology in Spanish.
Residents have options. But for nonresident homebuyers eyeing the lush landscapes and serene beaches of Costa Rica, understanding the available financing options is crucial to turning your dream of owning a slice of paradise into reality.
In recent years, the Costa Rican financial landscape has evolved, making it increasingly feasible for nonresidents to secure financing for their home purchases. While the process may differ from what you’re accustomed to in your home country, with the right information and guidance, you can successfully navigate the system. So, let’s explore the various home financing options available to resident and nonresident buyers in Costa Rica, offering insights into how you can finance your tropical property and make your dream a reality.
In Costa Rica, real estate financing options include a few different avenues: developer financing, owner financing, and bank financing. Each has its own benefits and conditions, detailed below.
Additional Points to Consider:
- Currency: Most financing options in Costa Rica are offered in U.S. dollars, though some local banks offer colón-based mortgages.
- Interest Rates: Costa Rican interest rates are generally higher than those in the U.S. or Europe, due to factors like inflation, risk, and the relatively small mortgage market.
- Closing Costs: These can be significant in Costa Rica, including legal fees, notary fees, and taxes. It’s important to account for these when planning your budget.
- Legal Advice: It’s crucial to engage a reputable attorney to review any financing agreements and ensure that all terms are clear and legally binding. This is especially important in owner and developer financing agreements.
Owner Financing
For a long (long!) time, this was the only viable, in-country financing option for foreign residents. You know the drill: With owner financing, the seller of the property acts as the lender. This arrangement can be particularly useful in private sales where the seller is motivated and the buyer prefers an alternative to traditional financing (which for years, was not available to non-resident foreigners).
Terms: Negotiable, but typically include a down payment of 25% to 50%, with the balance financed over 3 to 10 years. The currency is typically U.S. dollars and interest rates are usually comparable to developer financing (around 6% to 12%, standard for Costa Rica).
Benefits: There’s flexibility in terms and easier qualification processes. Seller financing can also result in a quicker sale, as the buyer and seller directly negotiate terms.
Considerations: Because terms are negotiable, it’s important to ensure that everything is clearly documented in a legal agreement. In some cases, interest rates or payment terms may be less favorable than traditional financing.
Developer Financing
This is now a common option in new developments, especially in pre-construction phases. Developers often offer financing directly to buyers, usually with flexible terms to encourage sales. Notably, some developers now work directly with local banks to provide financing, offering an interesting hybrid option for residents and non-residents alike.
Terms: Down payments typically range from 20% to 40% of the property value. The remaining balance can often be financed over a period of 5 to 15 years (this may change, of course). Interest rates can vary, usually between 6% and 12%, depending on the developer and the buyer’s creditworthiness.
Benefits: Developer financing is often easier to obtain than traditional bank financing, especially for foreign buyers. It can also offer flexible payment schedules and reduced paperwork, and can create a comfortable all-in-one package for purchasing your home.
Considerations: The financing period is usually shorter than traditional mortgages, and interest rates can be higher. Always verify the developer’s reputation and financial stability.
Bank Financing
Obtaining a mortgage from a Costa Rican bank is an option for foreign residents, though the process can still be more complex compared to financing in their home country, thanks to the need for obtaining foreign paperwork, authentications, translation, and more.
Eligibility: Banks typically require proof of residency (except for the current exceptions, detailed below), a stable income, and a good credit history. As of mid-2024, three banks offer mortgages to foreigners without legal residency in Costa Rica.
Terms: Expect a down payment of 20% to 50% of the property’s value. Mortgage terms usually range from 15 to 30 years. Interest rates can be higher than those offered in your home country, and typically fall into the range of 7% to 12%.
Benefits: Costa Rica real estate financing via local banks offers longer financing terms and can be a good option for those who prefer traditional mortgage structures.
Considerations: The application process can be time-consuming, with significant documentation required. Additionally, interest rates can be higher, and loan approval may take several weeks or months.
Costa Rica Real Estate Financing Options for Non-Resident Foreigners
Remember – if you’re a resident, the options are greater, as many banks with a Costa Rican presence will offer home financing to legal residents. For non-residents, though, the options are expanding:
Banco BCT
Banco BCT, a well-established Costa Rican bank, introduced in 2022 an exciting new financing option specifically tailored for U.S. citizen residents and non-residents of Costa Rica.
BCT is now offering second home loans and bridge loans, with a loan-to-value (LTV) ratio of up to 65%. This means that BCT will finance up to 65% of a home’s value, allowing for loans up to $1,500,000 (which equates to financing approximately 65% of a $1.35M home). The bank provides flexible terms of up to 20 years, with interest rates ranging from around 7.75% for fixed rates to PR+2.50% for variable rates. For added convenience, loan details are available in English.
The requirements for these loans are fairly straightforward and include providing your U.S. credit score, two years of tax returns, 12 months of financial statements, along with a few other standard requirements.
Scotiabank Costa Rica
To secure a mortgage as a non-resident customer with Scotiabank Costa Rica, you’ll need to complete and sign the application form, along with the SUGEF authorization form (for both debtor and co-debtor). U.S. and Canadian applicants must provide their social security number and residential address, while UK applicants should present their Credit Bureau report. Additionally, you’ll need to submit a full copy of your current passport and a second photo ID, such as a driver’s license.
Income verification is required and varies slightly depending on your country of residence: U.S. residents must provide the last two years of IRS-certified tax returns, while Canadian residents need the last two years of CRA Revenue Canada Agency’s Notice of Assessment. UK residents should submit their last two years of certified tax returns or the equivalent Notice of Assessment. All salaried borrowers, regardless of country, must present an income verification letter.
You’ll also need to provide two reference letters from your primary banks, the last three months of bank account statements, and three months of credit card statements. Evidence of assets, such as deeds, savings, and certificates of deposit, along with proof of the down payment, are also required. Additionally, the purchase option agreement, certified property charts, tax certification from the municipality, and a property register study are necessary.
Banco LAFISE
A loan through Banco LAFISE offers home financing with terms of up to 30 years and is available in both dollars and colones. To obtain your credit, you’ll need to meet some basic requirements, similar to those described above.
You can request financing for up to 70% of the property’s value, although this percentage may vary depending on the type of application; the down payment must be 30% of the property’s price. Home loans cover home purchase, construction, or renovation; requirements are slightly different when purchasing a lot or homesite.
General requirements include: a copy of a valid identification document, SUGEF authorization, up-to-date municipal tax certification, proof of down payment in case of lot or home purchase, minimum income of $1,000 or its equivalent in colones, credit application and completed forms, a legible copy of the property’s cadastral plan, up-to-date condominium fee certification (if applicable), and the purchase-sale option.
Looking for a Home? Seeking Costa Rica Real Estate Financing?
So many Costa Rica real estate financing options, so little time? Moving to Costa Rica can take years to plan, even if it only takes a few days to make the leap. We’ll be here for all of it – from those first tentative feelers (could I really do this?) to unpacking your bags, we’ll help you be as nitty-gritty-planner or as footloose-and-fancy-free as your heart desires.
Really. Whether you’re just getting your toes wet in the dreaming stage or have already made the move, we are happy to answer questions. We’re happy to make connections. And we’re even happier when we make new friends.
Along the way, we’ll help you explore all the many possibilities, joys, and roads to life in paradise. That’s what we do. Because at Blue Water Properties, we thrive on relationships. We crave connection. And our goal is never to “sell a house;” it’s to fulfill dreams. It’s to make people happy. It’s to help you. Genuinely help.
We promise the fastest communication and best services in the industry. We will work to deliver on your dream. We will never pressure you. And we really do hope we’ll become friends along the way.
We’re proud to offer some of the best Costa Rica real estate, from condos and homes to land and businesses for sale. So, go ahead – try us. Give us a chance to show off our expertise – and wow you with the possibilities! We look forward to it.
