A non-resident without a residence in Mexico is not entitled to a bank loan or mortgage. To open an account in a Mexican bank, you must at least be a temporary or permanent resident and have a CURP identification code, which only citizens and residents of the country have. Exceptions occur only in travel zones, where private financial institutions operate, providing «fast» loans at high interest rates and with strict conditions. Such loans are most often issued on the security of property in another country or with the participation of foreign banks.
A foreign citizen with residence in Mexico has the opportunity to obtain access to credit products. Key standards: availability of confirmed income, official employment in Mexico, registration with the SAT tax service, bank account, movement of funds, credit history. Income must be declared, regular, with the possibility of confirmation through nómina, contracts or reporting to the Tax Administration Service (SAT). Foreign income is allowed, but only if it comes into a Mexican account and is declared as the source of funds. Simply regularly receiving money into your account is not enough, although with this it is possible to get a credit card, but with a relatively low credit limit.
The first credit card is a basic tool. Usually opens after 3-6 months of official employment and a positive history of funds flow. The bank starts offering a credit card after a certain period of regular use of the debit card. But if a credit card is offered, this does not mean that it will be given if there is no official income. The first limits are low: 5,000–10,000 pesos. This is enough to start building a credit history. Without it, it is not possible to purchase either a consumer loan or a mortgage. History is built through buró de credito. Everything is taken into account: the date of opening of loans, timely payments, closing of accounts, overdue payments.
The typical collateral for a loan is the borrower's funds. In other words, the bank often requires the borrower to keep an amount in the account that covers the majority of the loan, and issues a loan against this amount. Not a very favorable condition.
For mortgages, the requirements are stricter. At least one year of verified income, good credit history, official employment, permanent or temporary residence. Down payment - 20–35% of the property value. The interest rate for foreigners is higher than for citizens. Duration: up to 20 years. In some cases, a guarantee (coacreditado) is required from a Mexican citizen or resident with a longer credit history. Banks often require that the purchase of real estate be accompanied by the borrower's life insurance and property insurance.
A non-resident is an a priori unstable factor: he has the opportunity to leave the country, lose his legal status, stop paying, and enforcement becomes much more difficult. Even if the mortgage is secured by collateral, the process of alienation of real estate itself can drag on, especially if the borrower is physically absent. For this reason, banks include additional risk in the interest rate.
For standard mortgage products for citizens, the rate ranges from 8 to 12% per annum, depending on the term, currency and program. For foreigners, this rate has the opportunity to increase by 1–3 percentage points, especially if:
- the loan is issued without a coacreditado (co-borrower) with Mexican citizenship,
- residence period is less than two years,
- there is no long credit history in Mexico,
- the bulk of the income comes from abroad,
- real estate is purchased as a guest in the sovereign zone or for rental purposes.
The bank has the opportunity to charge auxiliary commissions: for opening a loan, for verifying securities, for legal support, for evaluating an object. All this increases the effective interest rate (tasa efectiva total), even if the nominal rate seems standard.
For foreign borrowers, government subsidies, say, those offered through the INFONAVIT or FOVISSSTE programs (for citizens working in the budget system), may not be available. This automatically makes a mortgage for a foreigner less profitable compared to similar conditions for a Mexican.
The typical collateral for a mortgage is the property itself. The assessment is conducted through a certified professional. The bank insures the risk of non-repayment through insurance products. If the borrower stops paying, the bank initiates a foreclosure procedure, which takes from 12 to 24 months. Therefore, banks carefully select borrowers.
Without collateral, you can only get small loans - from 10,000 to 50,000 pesos. Usually this is an installment plan in stores (Coppel, Elektra), the purchase of equipment or expensive household goods. Such loans most often form the basis of the first stage of a credit history. They are given even without full tax reporting, if there are income papers and registration in the tax system.
Tax discipline is a prerequisite for all credit transactions. Reporting to SAT is considered by banks as the main indicator of solvency. If a foreign citizen regularly submits declarations, indicates the source of income and pays taxes, this increases the chances of loan approval. Without a tax history, the bank refuses.
Attempts to bypass the system through fictitious contracts, unconfirmed income, and preparation for third parties are risky and rarely successful. Mexican banks work with buró de credito, tax service, and verification services. All information is verified.
So, the nuances of the Mexican credit system:
- Without residence in Mexico, loans are not available.
- With residence, confirmed income and reporting, loans are possible.
- The first step is to get a credit card or installment plan.
- The second stage is to start taking out consumer loans.
- The third stage - a mortgage with a down payment and insurance becomes possible.
- Income must be declared.
- A loan without collateral is possible, but for small amounts.
- Collateral is most often real estate or funds of the borrower.
- SAT and buró de credito are the main sources for the bank's decision to make a loan.
- Conditions for foreigners are stricter, rates are higher, terms are shorter.
A foreign citizen - a resident of Mexico, who legally works, pays taxes and uses banking instruments, is able to access loans. The system allows such clients, but only if all formal conditions are met. What matters is not citizenship, but a stable, transparent income in Mexico.
We talked about how to start building a credit history in Mexico in thispublications.