f you want to buy property in Costa Rica, you might need to get a mortgage. Banks in your home country might be willing to give you a mortgage, although many banks prefer not to do so when buying property abroad is involved.
If you obtain a mortgage in your home country, the mortgage document will have to be authenticated by the Costa Rican Consul. Alternatively you can consider applying for a mortgage ( hipoteca) in Costa Rica. Mortgages can be denominated in Costa Rican Colones or in foreign currencies (in practice a US Dollar mortgage is the most common). Most banks require that you have a residency in Costa Rica and can show proof of a job and/or income. If you do not have a residency, there are still some banks (mostly foreign private banks) that might be willing to lend you money. Keep in mind that it is customary in Costa Rica that the borrower pays for mortgage costs, such as legal drafting fees in the purchase contract.
When obtaining a mortgage in Costa Rica you will often come across the terms Tasa Básica Pasiva (TBP). TBP is the interest rate calculated by the Costa Rican Central Bank every six months. Often interest rates for mortgages are indicated as TBP + X%. The percentage added is what the bank charges you. This percentage varies depending on the bank, amount, and personal situation of the borrower. The Tasa Fija or fixed interest rate is the rate applied during the first two years of the loan. The TBP at December 22nd, 2005 was 15,25%.
Another term you might run into is Tasa Prime Rate (TPR). TPR was 7.50% on February 1st 2006. Dollar denominated loans face a TPR + a percentage which depends on the kind of loan you prefer. If the loan makes up for 33% or less of the total value of the guarantee (the property) you will only be charged the TPR. If the loan makes up for 50% of the total value of the guarantee, TPR + 1 is applicable to you. For a loan that make up 70% of the guarantee, the interest will be TPR + 2. The TPR interest system is applicable only for the first five years of the loan. During this period you will pay a fixed rate. After the initial five years the interest rate will be adjusted monthly.
Many different banks operate in Costa Rica and all of them have different requirements for granting a mortgage. Below is a list of some of the mortgages on offer to give you an idea. Keep in mind that every mortgage application is treated differently, depending on your income and credit history in addition to the type of property you want to buy:
Banco de Costa Rica, one of the state-owned banks, offers the crédito residencial hipotecario in Costa Rican Colones. This mortgage can be for the duration of up to 25 years and can finance up to 80% of the total property value. You have to be a resident in order to apply and copies of the initial sales agreement, income statements, entry in the property register are required. A 1.5% commission fee is charged. Interest payable ranges for the length of the loan. In March 2005 an interest of TBP + 9% was charged for a 5-year loan and TBP + 6% for a 10-year loan. The Crédito Residencial Hipotecario is Banco de Costa Rica’s US Dollar nominated mortgage. The minimum amount is US$ 50,000 and financing is offered for up to 70% of the property’s value. The maximum duration of the mortgage is 25 years. Commissions or 1.5% upon signing, 3% during the first 5 years of the loan apply. Besides a solid credit background, residency and proof of income, you will, among other things, also have to hold a Banco de Costa Rica debit card and hold fire insurance.
Banco Cuscatlan is a bank with branches all over Central America. This is a private commercial bank and the range of mortgages is larger than with the state-owned banks. There are different mortgages available for construction and land purchase. Mortgage duration ranges from 6 to 20 years and the financing percentages range from 65% to 80% of the property value.
BAC San José is a Costa Rican owned private commercial bank. Mortgages offered are nominated in Costa Rican Colones and US Dollars. US Dollar Mortgages are charged a 9% fixed interest rate and an effective rate of 9.75% during the first five years of the loan. After this period the interest rate is be adjusted quarterly. Mortgages in Colones have a fixed rate of 17% for the year after which the TBP + 4 points becomes applicable. The duration of the mortgages is 15 or 20 years. Financing of 70% is given unless the mortgage exceeds US$ 300,000 in which case the maximum financing is 60%. A total of 5.5% - 8.5% on commissions has to be added of which 3.5% is commission of the bank.
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