How to Get a Mortgage in Costa Rica?

Securing a mortgage in Costa Rica, while different from processes in other countries, is a viable path for individuals looking to invest in its real estate market. This guide outlines the practical steps and considerations involved in obtaining a mortgage for a property in Costa Rica.

Understanding Eligibility and Lender Options

Eligibility for a mortgage in Costa Rica depends on residency status, income verification, and credit history. Local banks prefer borrowers with legal residency or a significant financial footprint within the country, making approval more complex for non-residents. Residency can enhance a foreign buyer’s chances of qualifying for traditional bank financing.

Lenders assess income verification to ensure a borrower’s capacity to repay the loan, reviewing income source and amount. Foreign credit history is evaluated, though local banks emphasize consistent income. International lenders typically look for credit scores above 700.

Several financial institutions offer mortgages in Costa Rica. Local banks, including BAC San José, Banco Nacional, Banco de Costa Rica (BCR), Scotiabank, Banco Lafise, and BCT, provide financing to residents and foreigners. They often require extensive documentation and may have longer approval times for non-residents. Interest rates from local banks typically range between 7% and 9.5% for USD-denominated loans, with terms from 15 to 25 years.

Private lenders offer more flexibility and quicker approval, sometimes within 7-10 business days. However, these loans generally have higher interest rates, typically 8% to 16% annually. Private lenders may accept lower down payments, sometimes 20-30% of the property value, regardless of residency status.

International banks and offshore lenders can facilitate loans for foreign buyers who do not qualify for local bank loans. These options may offer more flexible approval criteria and allow transactions in major currencies. Seller financing is a popular alternative, where the property seller acts as the lender, often providing flexible terms and down payments between 30% and 50%. Developer financing, especially for new constructions, is another option, with typical down payments ranging from 20% to 40%.

Gathering Required Documentation and Financial Considerations

Before beginning the application process, borrowers must gather specific documentation and prepare for financial commitments. Personal documents include a valid passport, residency permits (if applicable), and documentation confirming marital status. Lenders require these to verify identity and legal standing. Foreign documents often need to be translated into Spanish and notarized.

Financial documentation is paramount for assessing a borrower’s capacity to repay the loan. This involves providing proof of income through tax returns from the past two to three years, recent pay stubs, and bank statements for the last six to twelve months. For self-employed individuals, audited financial statements prepared by a Certified Public Accountant are often required. Lenders will request credit reports from the borrower’s home country, usually from major credit bureaus, to evaluate creditworthiness. These credit reports should be recent, within 90 days of submission.

Property-related documentation is crucial for the lender’s assessment. This includes the property title, a current survey plan, and an official appraisal report. These documents help the lender verify the property’s legal status, value, and boundaries. The property’s registration in the National Registry will also be verified.

Down payment requirements for foreign buyers are substantial, ranging from 30% to 50% of the purchase price. Some banks may require up to 60% down for non-resident applicants. Private lenders may offer lower down payment options, sometimes around 20-30%.

Interest rates vary based on the lender and currency. USD-denominated loans from traditional banks carry interest rates between 7% and 10%, while colones-denominated loans can have higher rates. Private lenders charge interest rates from 8% to 16%. Seller financing offers rates between 6% and 8%. These rates can be higher than in some other countries.

Closing costs are paid in addition to the purchase price and down payment, typically ranging from 4% to 6% of the property’s sale price. Components include a real estate transfer tax of 1.5% of the property’s registered value or sale price, whichever is higher. National Registry and documentary stamps amount to 0.85% to 1.2% of the purchase price, covering fees for the National Registry, Agrarian Fees, and Municipal Fees.

Legal or notary fees are a notable expense, as a Costa Rican notary public, who must also be a licensed attorney, is required to formalize the deed. These fees are often 1.25% of the property value, with a tiered structure where the percentage decreases for higher values. A 13% Value Added Tax (VAT) is applied to legal and escrow services. Mortgage registration fees, around 0.5% of the mortgage amount, and bank origination fees, ranging from 2% to 5%, also contribute to closing costs. Escrow fees, if using a third-party service, are around 0.25% to 1% of the purchase price.

Navigating the Mortgage Application and Closing Process

The mortgage application process begins with submitting documentation to the chosen lender. This leads to an initial review of the borrower’s financial profile and property details. If suitable, the lender may issue a pre-approval, indicating a preliminary agreement to lend based on the provided information.

Following pre-approval, the lender orders an appraisal of the property to ascertain its market value. This appraisal is a step in the lender’s assessment of the collateral. Concurrently, legal due diligence is conducted by a Costa Rican attorney. This involves a title search at the National Registry to confirm clear ownership, identify any existing liens, and verify proper registration. The attorney also ensures compliance with local zoning laws and environmental regulations, confirming the property’s legal usability.

Upon satisfactory completion of the appraisal and legal due diligence, the loan moves to the final approval stage. The lender issues a formal loan approval, which may include specific conditions that must be met before funds are disbursed. These conditions could relate to additional documentation, insurance requirements, or minor adjustments to loan terms. The approval process for traditional banks can take 6-12 weeks, or longer for complex cases.

The culmination of the process is the loan disbursement and property closing, which takes place before a Costa Rican notary public. A notary in Costa Rica must also be a licensed attorney and plays a central role in authenticating real estate transactions. The notary drafts and oversees the signing of both the mortgage deed and the property transfer deed. Funds are then disbursed, and all associated closing costs, including legal fees, transfer taxes, and registration fees, are paid.

Immediately following closing, the notary public registers the property and the mortgage in the National Registry. This registration formally records the change of ownership and the mortgage lien. The registration process takes 7 to 14 days after closing. After closing, the new property owner should ensure loan payments are set up and property declarations are updated with the local municipality for tax purposes.