CDMX Origins Part 4: Financing

To recap: I decided on a 1BD apartment in the Reforma area for $4,200,000 MXP, or about $211,000 USD. I do well for myself but I’m not rich by any means, so this kind of purchase must be financed.

Option 1: Using a Mexican Bank

To get a loan with a Mexican bank, you must be a Mexican citizen or permanent resident. I’m neither of these things, so going through a Mexican bank (the easiest, cheapest, and most convenient option) is not doable.

Option 2: Using an American Bank

It is technically possible to use an American bank to finance this kind of purchase, but it was not workable in my situation.

Obtaining a personal loan is possible, but the amount I’d need to borrow (upwards of $120,000) would be prohibitive with my wealth/income. The interest would be too much as well.

Obtaining a HELOC is also possible since I have significant equity in the condo I own in Austin, but the banks I spoke to did not like the idea. The use case of a HELOC is more for running expenses (e.g. remodeling a house, in which purchases are made over time) and less for large one-time purchases as I’m doing here.

Even if you plead your case, there is a general aversion for US financial institutions to loan for foreign property due to the insecure nature of the loan and the difficulty in repossession. If you buy a heavily-leveraged Mexican villa with a 90% loan-to-value ratio and lose your job or otherwise fall off the map, the lender is going to have a hard time walking into Mexico and seizing control of the property. They’re also not likely to enjoy maintaining it or figuring out how to offload it to someone else.

Option 3: Private Lenders

This leaves what I believe is the most common method of financing property in Mexico: private lenders.

Walking up to random people and asking them “are you insanely wealthy and willing to float me hundreds of thousands of dollars to purchase an overseas property” might produce some interesting conversations but as a strategy is unlikely to be fit for purpose.

There are a few companies which can facilitate this process though. Two of them: MexLend and Cross Border Investment (CBI). They maintain a stable of banks and private lenders, and when you submit your information about the property you want to purchase and your financial situation they shop you around to them, and the lenders respond with proposed terms.

In general the terms are not as good as using a US bank to purchase a US home, although not terrible. In my situation the lenders wanted a down-payment between 30-50% of the purchase price, very steep but reflecting the riskier nature of foreigners (who are natural flight risks) purchasing foreign property.

To start, I went with MexLend.

The MexLend Experience

I contacted MexLend first and was put into contact with a man we’ll call Frank. Frank was helpful and responsive to my many questions about the process, and since I am completely new to this kind of thing I had many. MexLend (and, I imagine, most entities like this in Mexico) specialize in properties in touristy areas: foreigners looking to buy a beach condo or villa in a place like Cancun or Puerto Vallarta. 1BD apartments in CDMX don’t fit their typical profile. Nevertheless Frank offered good insight and helpful advice until it all fell apart.

About two months into the process I began to wonder if I was getting the best deal. Not due to any intense displeasure with MexLend, just as someone brand new to this and not fully aware of his options and what should be expected. I contacted CBI to see what they could offer me, but they claimed to need (among other things) my birth certificate which I considered to be very unusual.

Still intending to continue with MexLend, I mentioned this to Frank and asked if this kind of request (for the birth certificate) is normal. His response was… not good. In his response emails he became agitated and indignant that I would be considering other brokers. He made me feel guilty, morally culpable, and even included what I’d call personal details about his financial situation, going so far as to indict me, should I cancel with MexLend, for financial hardship that would befall him and his company.

Overall, what I would consider a very unprofessional response. And something I could not tolerate. I have a strong rule that, in a situation like this, if I am being made to feel pressured or guilted into a particular course of action I quit. I will not be taken advantage of.

It wasn’t long before I cut things off with MexLend entirely, including a gratuity I offered to pay to Frank for the work he had performed up to that point. I was happy to pay a little extra since he really had done good work up to that point, but I just couldn’t continue the process as a captive client.

I began moving forward with CBI and it was a very nice and professional process. Looking back, however, I definitely should have stayed with Frank and MexLend.

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