GMAC Real Estate Mexico and Second Homes
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Mexico and Second Homes

Takeaways

  • Don’t underestimate the complexity involved in buying Mexican real estate.
  • Understand the "restricted zone" policies.
  • Look for U.S. based lenders for your mortgage.

Did you know?

  • Mexican real estate known as "ejido properties" can't be sold until they are privatized through a process known as regularization.
Get to know the regulations before buying in Mexico. Buying a second home in Mexico has traditionally been pretty tricky. The Mexican Constitution forbids foreign ownership in what is known as the "restricted zone" including all land within 62 miles of any border and within 31 miles of any coastline. To buy into the restricted zone, say a nice little beachfront bungalow, a U.S. investor must utilize a special Mexican government trust established in 1972 known as the "fideicomiso." This trust allows foreigners buy real estate in the restricted zone by having a bank act on the investor's behalf.

The other problem in buying a second home in Mexico has been financing the purchase. U.S. lenders have been leery in the past because if the borrower defaulted the loan the lender faced a tremendous amount of red tape when attempting to foreclose on the property. Another issue was Mexican home appraisals are determined differently than in the U.S. and are based on replacement cost of the home and not the comparable sale market value.

Because U.S. lenders didn't trust the Mexican real estate market, investors who couldn't buy real estate outright were forced to take a chance with short-term builder financing, or borrow through Mexican banks charging a high interest rate.

Changes Attract Lenders

U.S. lenders are now more willing to do business in Mexico after the Mexican legislature abbreviated the foreclosure provision in 2003, clarifying the rules for foreign banks. Another issue has been the lack of a secondary market for Mexican real estate loans, preventing any holders of Mexican second home mortgages from selling the loan if they chose. Companies like GMAC-RFC are working to develop these secondary markets to help lower the cost of these loans.

If you are pursuing a second home in Mexico and would like to find a U.S. lender for the mortgage, do make certain you have a Commitment for Title Insurance and a thorough title search that offers a complete and valid chain of title for your prospective real estate.

Search for Second Homes for Sale

To search for a selection of second homes for sale, please visit the website of a GMAC Real Estate Office that serves the area where you'd like to buy a second home. To learn more about buying Second Homes or Vacation Homes, explore the rest of this section, or contact a GMAC Real Estate Agent.