Closing Costs In Mexico: The Real Numbers

Closing Costs in Mexico: The Real Numbers Closing Costs in Mexico, in general, are much higher than they normally are in the USA or Canada. And the reason is, because closing costs in Mexico are, in part, based on a percentage of the purchase, or acquisition, price of the property. Furthermore, closing costs vary from State to State in Mexico.

Regardless of whether you are purchasing a property in cash or with a mortgage, and if you are a foreign purchaser or a Mexican national, closing costs require you to pay certain Government and Notary’s fees, which other than the inclusion of government permits and the trust for foreign purchasers, generally amount to the same costs.

Generally speaking, you could separate the total closing costs involved in the purchase of a property in Mexico, into Government Costs and Notary’s costs, on a cash deal. And, Government Costs, Notary’s Costs and Mortgage Fees, on a mortgage deal.

Government and Notary’s costs can be identified as:

- Transfer Tax (ISAI) - (ISAI – Impuestos Sobre Transmision Patrimonial) – This is a state tax. The Notary
(Public Notary) is responsible to charge and declare this without surcharges. This tax is usually calculated according to a table, but the Notario is the final determination. The tax usually varies between 2.2% and 2.5% based on the sales price of your property

 - Registration in Public Registry Trust - (Registro Publico de la Propiedad) – These recordings or registrations are processed through the Notario and are based on the sales price of your property for the Trust recording, and the loan amount for the mortgage recording. The Notario processes these through the local Registro Publico de Propiedad in the state you are purchasing in. RPP to record/register the mortgage is only required when a loan is present. - Registration in Public Registry Guarantee Loan

- Foreign Affairs Ministry Permit (SRE) - (SRE – Permiso de la Secretaria de Relaciones Exteriores) – This is a permit that the Notario processes through their agents. This is a fixed fee and required to obtain the fideicomiso (Trust).

- Trust. Set up fee - This is a one-time initial fee to set up your Trust (Fideicomiso). This is required for property purchased in the Restricted Zone (100 km within border or 50 km from the coastline). A trust is also required when purchasing property outside the Restricted Zone for the purpose of using a mortgage to purchase the loan. This is a lender requirement, not a requirement under Mexican law, and is used to facilitate the use of a mortgage loan. The trust is a Fedeicomiso en Garantia (Trust in Guarantee).

- Trust. First year fee - There is an annual fee charged by the bank to maintain the Fideicomiso (Trust). This is paid in advance, so you have to pay for your first year at closing in addition to your one-time setup fee.

- Registration in Foreign Investments Registry (RNIE) - (RNIE – Registro Nacional de Inversiones Extranjeras) – The Trustee has the obligation to process the registration of the Deed (Escritura Publica) within a 30 day period after the granting. This is a fixed fee and also paid in advance.

- Deed Registration at Public Registry - This is essentially a courier fee. There is a courier that provides the service for traveling to and standing in line at the registry offices

- Certificate of No Debts Municipal and Cooperation - The Notario has the obligation to check that the subject property has no liens, municipal taxes, or unpaid water debts against it. This certificate is good for a period of 30 days, and must be brought up-to-date and re-issued if it expires prior to the closing. A fee will be charged every time a new certificate is issued.

 - Certificate of Freedom of Liens (Checked by the Notary) - Certificate of No Tax and Water debt (Checked by the Notary)

These fees, in addition to the Notary’s services fee, are what you would generally be facing in a cash deal as a foreign investor/property purchaser in Mexico. And, depending on the Notary you are using, and the State you are closing in, these fees will amount to an approximate 5% to 6% of the actual purchase price of the property.

Now, and when using a mortgage, these fees will increase by an approximate 3% to 4% of the purchase price. These fees will include the Bank’s origination fee, the processing fee, and the appraisal fee. And in some instances the Mortgage Broker’s fee.

Therefore, and as a rule of thumb, the total closing costs amount you should normally be paying at a closing, even when utilizing a mortgage broker to assist you in your mortgage approval process, should be anywhere between 8% to 10% (maximum) of the actual purchase price of the property.

 The highest percentage closing costs ratio (10%) applies mostly to purchases in the 100k range, since there are some fixed costs and based on the lower price, the factoring % ratio increases.

 In conclusion, if your Mortgage Broker is quoting you anything above and beyond a 10% closing costs estimate figure, you should be shopping around for a better deal.

This report courtesy of Enrique (Henry) Saldana-Mexico Realty Solutions www.mexicorealtysolutions.com; moneylendingbus@hotmail.com; Tel: (984) 147-2388 - Cel: (984) 111-8743. You may follow us at: http://hmortgages.blogspot.mx/ (English) or http://henryplaya.wordpress.com/ (Français)