Costa Rica Mortgages - March 2010

Costa Rica Mortgages - High commission costs

Scott Oliver - Updated March 2010

As an Wall Street trained professional investment advisor with over twenty years of experience, I can tell you that my international investment clients demand a level of service that unfortunately does not seem to exist in Costa Rican banks and most investment firms.

I love this country and it's people but unfortunately Costa Rica mortgage services and most areas of banking and financial services still need a great deal of improvement.

It may be a 'cultural' quirk but here's what I would observe:

• The respect for the 'time value' of money is not the same. Sure all Costa Rican banks offer CD like time deposits but your 'private banker' probably doesn't even make $1,000 per month so it's unlikely he has a meaningful amount of money invested and does not fully appreciate that "time is money."
• A sense of urgency is simply not there. When you want something done now! An order placed - now! It is rarely done "now!" Everybody is remarkably polite and friendly as the Ticos normally are but getting things done in an expeditious manner is not as easy as it should be.

Higher Fees Means Better Service, Right?

When we evaluate offshore hedge funds for clients, on occasion we must justify the fees charged by one fund in comparison with another. When a hedge fund has higher fees than normal, we want to see superb management skills, preferably lower risk levels and a proven track record clearly showing that the performance is superior to the competition and to the comparable indices.

This - superb management + higher performance = Deservedly higher fees equation does not apply when it comes to banking and mortgages in Costa Rica.

Take a look at Bankrate's Closing Cost Survey and you'll see that the closing costs for a $200,000 loan (30-year, fixed-rate mortgage for a borrower with a 20-percent down payment and good credit to buy a single-family house) where the "Lender, title and settlement fees totaled an average of $3,024" which is 1.512%

Costa Rica Mortgage Costs:

As you can see from the March 2010 chart above, with Costa Rica banks, the lowest US$ mortgage closing costs - alone - were 1.27% with most charging 2% and some 3%

This means that even with the lowest Costa Rica mortgage commissions, Costa Rican banks charge way more in mortgage closing costs than most banks in the USA and there are other costs on top of that....

• In addition to that 2-3% in commission the Costa Rican banks will also charge you for the legal and insurance costs plus please also bear in mind that the interest rates will also be much higher than the US and...
• Costa Rica banks are very conservative in their lending and be warned that you may also be asked to pay for extensive medical tests.
• Please also remember that those high Costa Rica mortgage closing costs would be in addition to the fees charged by the attorneys for the actual closing of the transaction.

Bottom Line: If it's at all possible, we would encourage you to explore any and all financing options in the US before resorting to applying for a mortgage in Costa Rica. Having been through the mortgage process a few times, I can assure you that it's not a fun experience and it's expensive.

Written by Scott Oliver, author of 1. Costa Rica Real Estate Scams & How To Avoid Them, 2. How To Buy Costa Rica Real Estate Without Losing Your Camisa, 3. Costa Rica's Guide To Making Money Offshore and the Director/Producer of the Costa Rica Living & Retirement - Secrets To Happiness DVDs.