These days, offers abound on Costa Rica real estate for local buyers with promises that the house of their dreams is theirs for a down payment of 15-20% of the total value. Not bad, right?
However, once you add 3% for closing costs, 5% for the conveyancing and 2% on top to ‘set up’ the mortgage, if applicable, then the initial percentage of the purchase price that you’ll need to buy your Costa Rica real estate could be as high as 30%. Does that still sound so good to you?
Probably not, but that is what is really happening to all those people who have finally decided to go out and buy their own piece of Costa Rica real estate.
Porfirio Ortiz, financial adviser for CrediCorp, says Costa Rica real estate buyers must be very clearly understand that their first expense, which is made up of the down payment and the rest of the legal expenses and mortgage formalities must be paid by the purchaser.
“Whether you use your own savings or find additional credit, the buyer must meet that first, not insignificant, expense,”he explained.
1. Buying a property starts generally by paying a deposit as proof of intent. This initial deposit is usually between one and five per cent of the property value and makes up part of the down payment. This deposit shows the vendor that the buyer is serious. If the sale goes through, this money forms part of the down payment. If the parties cannot reach a final agreement, the seller will return this deposit to the buyer. However, if the buyer decides to come out of the deal after signing the contract, he could lose this deposit.
2. Next, the actual down payment of the house itself must be paid, this being 20% of the total value, and finally the expenses for bank mortgage formalities and the conveyance of the property.
3. For example, if we talk about a house costing around $100,000,the down payment will be around $20,000 – quite a substantial amount. To this can be added other costs: 5% for conveyancing coming to $5,000; legal costs at 2% coming to $2,000 and finally another $3,000 for the 3% bank’s commission. In total, the down payment is actually $30,000
A fair amount?
According to Alejandro Coto, because of the great supply of housing loans, mostly in dollars, the down payment amount has changed a lot. Five years ago, says Coto, down payments for houses were scarcely 10%, however, now the amount has trebled mostly because the banks have been offering lower loans.
In Costa Rica, depending on the individual’s financial position, a buyer can ask for up to 80% loan of the property’s value. This value is fixed based on a property valuation undertaken by the bank itself. This means that whoever wants to buy the house must calculate his finances very carefully before leaping in to buy.
Some key questions are: “Can I save enough beforehand for the down payment?””Will I have enough with the amount fixed by the valuation to cover the price of the house that I want?””Can I make the mortgage and interest payments?”
Finally, when thinking about the size of the down payment, it is vital to think about future housing and family needs. It is worthwhile asking yourself if you will need extra funds to remodel the house or to buy another car to get to and from your new home.
At the end of the day, each person has a different situation and there is no one correct answer overall. So think it over well and then get out there!
Our thanks to Cynthia Briceno and our friends at La Nacion – Costa Rica’s largest Spanish circulation newspaper for their permission to use this article.
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