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All Mexican real estate that is located within 100kms of Mexico’s international borders and/or 50kms from Mexico’s coastal waters cannot be owned directly by foreigners as per Mexican law (referred to as their ‘restricted zone’). This includes all of Baja California, most of Sonora State, remaining northern and southern international border area… popular coastal cities like Puerto Penasco, Puerto Vallarta, Cabo, Cancun, Acapulco all fall within this restricted zone.
Although all non-Mexican citizens (all foreigners) over the age of 18 can legally own property in these areas of Mexico via a Mexican land trust called a fideicomiso. The trust has a 50-year term and can be renewed perpetually to allow for seamless long-term control of the asset. The property can be willed from generation to generation, sold, improved, etc. There are no restrictions that prohibit non-Mexican citizens from owning property in Mexico via a Fideicomiso. You may choose to hold your rights to the property in your individual name(s), a US-based revocable trust, LLC, or corporation.
A buyer of Mexican real estate holds the same rights as a property owner in the US, including the right to enjoy, sell, rent, improve the property, etc. This ownership is acquired through a fideicomiso or bank trust. The Bank Trust is a legal substitute for fee simple ownership (as is ownership in the US), but the Trustee is the legal holder of the property. The rights to the property may also be transferred to a third party or passed on to named heirs. Sometimes, the property being purchased is already held in a fideicomiso (trust). If this is the case, the buyer has the option of assuming that trust or having the property vested in a new trust.
Anyone can buy your property usually without restriction. No restrictions exist if you have a mortgage and later decide to sell the property. Just as in the United States, the mortgage is paid off prior to or concurrent with the close.
The Mexican bank, or Trustee Bank, takes instruction only from the Beneficiary of the trust (the buyer). The beneficiary has the right to use, occupy, build upon, improve, lease, and possess the property. The beneficiary may also instruct the Trustee to transfer the rights to another qualified buyer or bequeath the property to an inheritor. The initial term of the trust is 50 years; however, the trust can be renewed for additional periods of 50 years indefinitely, providing for long-term control of the asset. The trust continues until extinguished or renewed.
No, property held in trust or Fideicomiso by a trustee bank is not an asset of the bank. If the bank goes into financial difficulty, the property is simply transferred to another trustee bank. These laws are federally imposed.
No. Under the trust agreement, the beneficiary (you) has a contractual right with the Mexican bank to all benefits that result from the use or sale of that property. As trustee, the bank has a fiduciary obligation under Mexican law to respect the rights of the beneficiary. The same beneficiary has a contractual right to renew the bank trust for another 50-year term upon expiration and can make multiple extension requests without issue.
The duration of a typical “Fideicomiso” Bank Trust is 50 years, though it is renewable for additional 50-year terms with minimal effort.
An impartial third party, namely an escrow company. The third party is entrusted with the job of seeing that the transfer of ownership from the seller to the buyer takes place according to the terms of the written contract agreed upon by all parties involved.
The third-party escrow agent holds any funds securely (including proceeds from your mortgage loan) until the legal closing commences, according to the terms outlined between buyer and seller in the agreement. The agent then disburses the funds to the designated parties after all parties have signed. Disbursement typically occurs either the same day as signing or the following day, depending on wire transfer cutoff times.
Title insurance is available in many markets across Mexico. There are some geographic areas where title insurance policies are not issued unless the developer has obtained a master title insurance policy on the entire development.
While some foreign buyers forego the purchase of title insurance when purchasing property in Mexico, this is not advised. Title insurance protects you, the buyer, against situations where the seller might not have the legal right to sell the property or other parties may have claim to the property in the future. These unfortunate circumstances are much more common in Mexico than you might expect. Title insurance policies are issued only after an extensive title search is completed on the subject property and is part of the loan process. We encourage you to, when/where available, purchase a residential title insurance policy.
Any legal property transaction in Mexico must be overseen by a Notario Publico. Beware of any real estate sellers that request a ‘soft closing’ or a closing that doesn’t involve a Notario Publico.
The Notario Publico's responsibilities include reviewing all required documents with respect to real estate transaction, including the assurance that all required documents have been reviewed and executed properly, in accordance with the laws in Mexico.
In addition, the Notario Publico makes sure that all legal formalities have taken place as well as collecting all taxes and forwarding such monies to the Tax Authorities in Mexico.
The purpose of an apostille is to authenticate the notarization and or certification of documents to be used in a foreign country. An “authentication” certifies the signature and the position of the official who has executed, issued, or certified a copy of the document.
The Public Registry is a government office where documents are held that reflect current and previous ownership of land titles. This is like a ‘County Recorder’s Office’ in the United States.
In Mexico, deeds are public instruments and can be researched at these offices, which are open to the public.
Most cities and towns of Mexico have a Public Registry of Property. In a real estate transaction, the notary public conducts a search of the title encompassing a previous 10-year period to verify that there are no liens or encumbrances recorded against the property and verifies that the seller has the capacity to transfer ownership.
Closing costs vary depending on several factors and generally range from 5-10% for purchase transactions.
Here's a detailed view of costs associated with legal property transfer transactions in Mexico.
In purchase transactions, the buyer typically pays most of the closing costs, including transfer tax, notary fees, and other related costs and charges. The seller, from proceeds, typically covers any capital gains tax due and broker commissions. If the property is purchased below the city tax assessed value, there may be a reverse capital gain triggered (acquisition tax) typically owed by the buyer.
Property taxes in Mexico are usually considerably less than the US and Canada. Taxes are based on the tax assessed value of your property and the municipality governing the location of the property. Many clients find that property taxes in Mexico are a tiny fraction of that which they are accustomed to paying in many US States.
Because of the US/Mexico treaty against double taxation, you may be eligible to receive tax credits in the United States for taxes paid in Mexico. Seek advice from your financial advisor or CPA for your specific situation.
We recommend to clients that they explore taking cash out of American properties/ assets as the rate is typically much lower when qualifying through a conventional US bank.
We can refer you to a few reputable companies that do offer financing to US citizens interested with investing in Mexican real estate.
They offer U.S. citizens sound and secure cross-border mortgage financing for purchasing destination real property in Mexico or for refinancing an existing mortgage. For current owners, they also provide cash-out refinance options that provide secure liquidity without restrictions on the use of proceeds. Live as your heart desires while protecting your assets and adding to your legacy.
Yes, a few companies do offer cash-out refinancing to existing property owners of up to 60% LTV. For example, a home with an appraised value of $1,000,000 is eligible for a cash-out refinance loan of up to $600,000. Any existing lien(s) against the property would have to be paid off with the new loan proceeds at closing, ensuring that the lender retains a 1st lien position.
Only completed, habitable residential property. This includes condos, single family residences, and occasionally mixed-use properties where 50% or more of the a/c square footage is residential. Some sellers may offer financing or a private lender.
Since the real property is in Mexico, Mexican law deems the source of income to be located within its jurisdiction, making it subject to taxation - typically on any capital gain - by Mexico. This is consistent with tax practice and legislation around the world.
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