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| Destinations >> Mexico >> Mexico Mortgages & Financing |
 Financing your Mexico home has never been easier. Until recently, if you wanted to buy a home in Mexico, you had to pay for it all in CASH. Most retirees and second home owners are not aware that home financing in Mexico is available through both U.S. and International lenders. Cash is no longer the only path toward a home purchase in Mexico and home financing is becoming the wave of the future.Americans and Canadians are now able to qualify for a home loan in Mexico that offers low payments, competitive interest rates, attractive down payments and great terms. Loan programs are designed exclusively for the U.S. and Canadian buyer wishing to acquire Mexico real estate for use as vacation, retirement or investment purposes. Obtaining a home loan in Mexico is slightly different than in the U.S. There are different customs, laws and regulations that apply to Mexico home loans. Only a handful of U.S. and international lenders and brokers offer such specialized home loans to foreigners purchasing Mexico property. If you are planning to buy property in Mexico, we highly recommend that you seek the advice of a qualified lending company who has a strong demonstrated track record of executing home financing in Mexico.
With the Mexican property as collateral, American and Canadian second home owners and retirees are able to secure a home loan in Mexico. Mexican citizens or foreign nationals other than Americans who live, work and pay taxes in Mexico m ay also obtain Peso loans to secure their Mexican home or land purchase.
The good news is that money is available if you choose to finance your Mexico home purchase rather than pay cash. With a little homework, a retiree can easily get pre-approved for a loan in Mexico. Once you have completed your search for a great retirement community in Mexico, your next step is to find out the total loan amount you are qualified to obtain for your Mexico property purchase. To get qualified, we encourage you reach out to a Mexican home financing expert.
Reverse Mortgages to Finance Mexico Home
Reverse mortgage, it allows homeowners 62 or older to essentially sell their house back to the bank in exchange for monthly payments, a lump sum or a line of credit. Recent changes in U.S. law have made it easier for seniors age 62 and older to qualify for a reverse mortgage. A national loan limit increase has opened the door to higher reverse mortgage loan amounts. What this means to the potential retiree is the opportunity to utilize a reverse mortgage to pay for a home in Mexico.
Homeowners are using reverse mortgages to buy properties abroad. With a reverse mortgage, instead of the borrower making payments to the lender, as with a traditional mortgage, the lender makes a payment, or payments, to the borrower. The borrower keeps control of the house and doesn't have to pay back the money as long he or she lives there. When the homeowner dies or moves out, the house is sold, the loan is paid off, and any money left over goes to the owner or the estate. To make sure borrowers understand how the loans work, the U.S. Department of Housing and Urban Development, which backs reverse mortgages, requires loan applicants to go through counseling. But there are no restrictions on what people can do with their home equity. Using uor IRA to buy Real Estate in Mexico It is estimated there are 45,000,000 IRAs (Individual Retirement Accounts) in America. These forty-five million IRAs hold Four Trillion Dollars even after the recent Stock Market and Banking debacles. Most Americans with IRAs do not know they can use IRA funds to purchase real estate including foreign real estate. Yes, even Mexican real estate inside its "Restricted Zones" where the Fidei Comiso or Bank Trust is used can be purchased. "Why haven't I heard about this?" You ask. Wall Street controls 97% of four trillion IRA invested dollars (it was six trillion a few months ago). Its agents, Stock Brokers and Financial Planners aren't about to educate you and lose lucrative commissions from buying and selling products to your IRA. Also, most Realtors® don't know an IRA can buy real estate. This is painfully evidenced by the minuscule amount of Realtor® IRA held property, the very product they sell. If Wall Street isn't going to tell you and your Realtor® isn't going to tell you, who will? Ah, the very point of this article. Most IRAs were created by Wall Street Affiliates who will not accommodate an IRA buying real estate. You need to open a Self-Directed IRA to gain total control. Transferring IRA funds to a Self-Directed IRA Custodian is simple and not subject to taxes or penalties and can cost as little as $50.00. Note, however, there are several variants of the Self-Directed IRA and the recent Individual 401(k) that are best discussed on an individual basis. Okay, you have a Self-Directed IRA that can buy real estate. Don't throw caution to the wind like "investors" did a few years ago; mail hefty Earnest Money checks to Realtors® they had never met, in cities they never visited, for developments they had never seen. Due diligence is mandatory. That being said IRA opportunities abound including Mexican real estate. With the recent deflation of the "Real estate Bubble" (35% - 60%) the timing could not be better. There are many attractively priced excellent opportunities to buy real estate now with your IRA. And you can even partner with your IRA as a TIC (Tenant In Common). I'll bet your friendly Realtor® or Stock Broker or Financial Planners never told you that? So whether you retirement dream be just remember the funds to buy that dream today may already exist-in your IRA. For more information on how an IRA can buy real estate contact Guidant Financial Group. If you are looking at real estate abroad, or for a way to get better returns in your IRA, here is little secret your stock broker will never tell you about.. The IRS lets you purchase real estate with income that is tax-deferred. That means that many savvy investors are investing their IRA funds in real estate. This is a great way to beat the ups and downs in the stock market, to diversify your portfolio or to provide a stable income as you transition from riskier investments.
How Can You Do This? The rules governing the ownership of real estate abroad this way are simple. First, you may purchase practically any real estate you can imagine: raw land, condos, office buildings, single or multi-family homes, apartment buildings and improved land. You can also own a fraction of real estate, with other entities or investors owning other fractions. You can purchase an option on the real estate or you can buy outright using a land trust, L.L.C., or similar entity. Also, you can rollover your IRA, so you are buying the real estate with retirement assets.
The Main Limitation The one exception is that you can't use the Abroad real estate in your IRA as your residence or vacation home, if you are under 59 & 1/2. This is logical, since your retirement funds are tax deferred and are meant to be used for your retirement. In other words it can be any kind of property, but you can't use it personally, unless you are already retired and take the amount as a distribution.
Other Limitations
Your business can't lease space in your IRA-held property. You cannot place real estate that you already own into your IRA. Your spouse, your parents, or your children also couldn't have been the previouse owners of the real estate. Property owned by siblings may be allowed, since the Internal Revenue Code (section 4975) specifies that only "lineal descendents" be disqualified.
Buying the Property Your IRA custodian must actually buy the real estate you are investing in. So, the title will really be in their name, not yours. You may put up the deposit with your personal funds, in order to reserve the property until the legal structure is in place, in this case you have to be sure you include that amount in the total due so you get your money back from your IRA at closing.
How you can set up the account - the IRA custodian You will need an independent IRA custodian that allows real estate investments and work with that company to set up an IRA account. Most banks and brokerage companies, limit your choices to products they sell. However, section 408 of the Internal Revenue Code permits individuals to purchase real estate with funds held in many common forms of IRAs, including a traditional IRA, a Roth IRA , and a Simplified Employee Pension plan, or SEP-IRA.
To find a custodian that specializes in real estate, search under terms such as "real estate IRA" or "self-directed IRA." You can't serve as the custodian of your own account. It is important to select a custodian knowledgeable about the types of investment you're interested in, because the custodian holds title to the real estate. It is vital that you find a custodian who will permit foreign property or leveraged property. What if your IRA doesn't have enough money? If the property is financed, you must structure the purchase correctly so as to avoid adverse tax consequences down the road. Also keep in mind that if the property is leveraged, the debt must be a non-recourse promissory note. But it is possible for your IRA to take on a debt. Another way is to purchase an interest in the property along with others, such as a spouse, business associate, or friend.
Operating property in your IRA Because all property expenses, including taxes, insurance, and repairs, must be paid from funds in your IRA, you'll need liquid funds available in your account. Of course, all income generated from the property will be deposited in your IRA account so you might use that money to cover your costs. Or you can make annual contributions within federal guidelines: $3,000 annually to a traditional or Roth IRA ($3,500 if you're age 50 or older); and as much as 25 percent of your annual compensation, up to $40,000, if you're a self-employed individual with a SEP-IRA. If your account doesn't have funds to cover property expenses, you will have to withdraw the property from your IRA and pay taxes on the value of the property, as well as possible penalties for early withdrawal.
Selling the property The buyer cannot be a family member. Once a deal closes, your IRA account now holds the cash — ready for you to make your next move. A great way to build up your retirement fund is to sell property with seller financing so that all payments made by the buyers are paid to the IRA.
Distributing your property You can withdraw real estate abroad from your IRA and use it as a residence or second home when you reach retirement age (age 59Vz or older for a penalty-free withdrawal). Either the IRA can sell the property, or you can take an in-kind distribution of the property. In that case your IRA custodian transfers the property title to you. If you expect the property to appreciate and you want to
eventually take it as a distribution, then the Roth IRA is your best vehicle (seebelow) Whether your retirement strategy is to hold properties or buy and sell for gain, real estate investing through your IRA can yield extraordinary returns toward your future retirement.
IRA Options * A traditional IRA lets you deduct annual contributions (currently set at $3,000, or $3,500 if you're age 50 or older) from your income. However, once you begin withdrawing money, those funds will be taxed as regular income.
* A Roth IRA gives you no deduction on your current contributions (again $3,000), but does allow you to withdraw funds tax-free. If you expect to buy a real estate investment in an IRA and hold it for a long period, this is probably your best option, particularly if the property increases in value over that period. If the property was held in a traditional IRA, you have to pay income taxes on the current value of the property when you sell it or take it as a distribution. With a Roth IRA, you won't owe taxes at distribution, this is the best way if you anticipate that your real estate investments will appreciate over time.
* A SEP-IRA is designed for self-employed individuals and small companies. You can contribute up to 25 percent of your compensation, or $40,000, whichever is less. However, keep in mind that if you have employees, you must make contributions for them as well. This option is a great alternative for real estate practitioners who can make the higher contributions because they can build up funds more rapidly to purchase properties. Withdrawals from a SEP-IRA are treated like those of a traditional IRA for tax purposes.
For more information contact Guidant Financial Group |
