Given you found your dream property in Costa Rica, you have further interest in purchasing and you want to move forward. Unless you do not have enough capital to do the purchase you might consider applying for a mortgage or credit at banks. At the moment the times are not easy for banks, so especially in the United States and other first world countries it is difficult to get a mortgage or a credit.
The next idea of you could be, that you might try to finance by a bank from Costa Rica. When doing you research regarding credit products in Costa Rica you will realize very quickly that the interest rates from Costa-Rican banks are everything but attractive. You are usually used to lower rates. Additionally the application process is a lot more complicated than in the U.S.
But there is another option you could consider Owner Financing. If you wish to buy a home but do not have the credit and cannot afford the down payment, then owner financing is an option you may look out for. Owner financing or seller financing is a process by which the seller offers a part or whole of the home purchase price with or without a mortgage on the property.
In Costa Rica exist plenty of motivated sellers who are willing to do owner financing. This may be your preferable choice if you are in any of the following situations:
- You do not qualify for traditional loans
- You may not have enough funds to pay the closing costs on a mortgage or you may like to avoid paying such a large sum of fees. This is where owner finance can save you thousands of dollars in loan costs.
- You may wish to avoid the lengthy loan process and close on the home within a few days. This can be done through owner financing or seller financing.
If the seller does not need all the proceeds from the sale right away, then owner-financing a home can be a great investment.When you put money in the stock market, you might get 6%, or maybe a little more or you could lose 5, 10, or 20%. By contrast, owner-financing gives the seller a guaranteed return of whatever the interest rate on the loan is.
Although sellers who owner-finance can technically charge a higher interest rate than banks, in Costa Rica the majority does not, as they are eager to close a deal.
The main risk to the seller is that the buyer will fail to make the monthly payments (known as defaulting on the loan), but in that case the seller can reclaim the house (foreclose on it) and sell it to get their money back. The seller is fine as long as they can sell the house for at least as much as is left on the loan.
Tobias Schnellbaecher is the co-owner of the real estate broker in Costa Rica called “Tierralinda”. Here you can find out more about the agency by the following link
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