How To Borrow To Buy Real Estate

Aug. 13, 2008, Panama City, Panama

“Used to be, Americans wanting to own in Nicaragua or Panama, say, would borrow in the States against equity in property they owned there. They’d take out a second mortgage or arrange a line of credit…then come to this part of the world and write a check. Those days are over…”

Developer friend in Nicaragua

Right…U.S. lenders and mortgage brokers are less open-minded these days. Plus, U.S. property values are falling, meaning the equity the average American believed he had cached away in his home is shrinking.

What are your options, therefore, in the current climate, for borrowing to buy overseas?

Better than they were four or five years ago but more limited and more complicated than the average would-be foreign buyer is probably prepared for.

First, if local funding is available, it won’t be for 100% and certainly not for greater than 100% of the purchase price. Up to 70% loan-to-value (LTV) is typical outside the States.

Second, local funding won’t be amortized over 30 years. The best you can hope for, typically, is a 20-year term.

Third, fixed-rate mortgages are virtually nonexistent outside the States. In the rest of the world, you’re going to have to agree to pay a rate of interest that will adjust (up) over the lifetime of the loan.

Fourth, your local financing is likely going to come with a local life insurance requirement…which is likely to come with a full physical exam requirement (see the note from your fellow reader below). This can be a deal breaker depending on your age. Typically, you aren’t going to be able to buy life insurance anywhere in the world beyond age 70. This means that, if you’re 60 years old today, you’ll be limited to borrowing for a term of up to 10 years maximum.

Given all that, it’s relatively easy for a foreigner, especially a legally resident foreigner, to borrow conventionally to buy real estate in the UK and Europe. We’ve arranged financing through local banks in Ireland, the UK, and France. While, in each case, it wasn’t as straightforward as borrowing in the States, the point is, it was possible. And, looking back, it wasn’t horribly painful. Lenders in the UK and Ireland, like their counterparts in the U.S., are increasingly nervous these days…which probably isn’t a problem, as I don’t know why you’d want to buy a piece of real estate in either of those places right now.

In France, here’s your best option: France Home Finance, a mortgage brokerage firm owned and operated by an American long in France. In other words, Tahminae takes a creative American approach to borrowing to buy…and, after nearly a decade doing business in France, she knows how to navigate that country’s banking infrastructure to the best possible end.

In Italy, too, we have experience with a woman (in this case British) adept at helping foreigners to buy…and to borrow to buy…in this country. HouseAroundItaly is based in the Abruzzo region but has resources countrywide.

The Brits’ appetite for acquiring real estate in other countries has spawned a foreign-purchase mortgage industry in that country. Of course, you don’t have to be British to avail of its services. See, for example, Conti,, which can help you borrow to buy in 45 countries.

Outside Europe and the UK, the foreign buyer’s options are not only limited, they’re often non-existent…though, again, they’re better than they were even a few years ago.

Easiest place in the Americas for a foreigner to borrow to buy real estate is Panama, where at least a dozen international banks are vying for your mortgage business. That said, spiking sales prices in Panama City have pushed lenders to put cost-per-square-meter ceilings in place (of, say, $1,500 per square meter). In other words, the loan to value is based on the bank’s per-square-meter ceiling rather than the sale price of the property. Best resource for shopping a mortgage in this country is Giulia Gonzalez,

The lending industry in Mexico is not as competitive as that in Panama, but, as a foreign buyer, you do have options. You’re looking at an LTV of 50% to 70% and a term of 10 to 20 years. You can borrow in either pesos or U.S. dollars; peso interest rates are higher. Doug Jones with Mortgages in Mexico can tell you more:

Here’s your best source for borrowing in Belize, Costa Rica, and Nicaragua: Georgetown Trust. They lend in Panama, too.

Finally, a distinction: A foreign buyer is not the same as a resident buyer who happens to be foreign. In other words, some markets that don’t lend to foreigners do lend to foreigners who can prove legal residency.

Kathleen Peddicord.

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