Everything You Need to Know About Buying a Second Home in Mexico
There are many different reasons why people consider Mexico to be an ideal place to buy a second home. In addition to being a cheaper alternative to Canada and the United States, Mexico has much lower property taxes. Furthermore, Mexico offers a much lower cost of living than Canada or the U.S. For these reasons, the cost of living in Mexico is much lower than average. This means that you can save money while enjoying the same standard of living as other first-time homeowners.
In addition to low costs, second homes in Mexico also tend to have less traffic and much less noise than properties in North America. Most individuals looking to invest in second homes in Mexico do so because they wish to live in a quiet, private community where property values are higher. In addition, Mexico’s climate allows them to take advantage of the country’s warmest seasons. Whether you are buying a beachfront villa in Mexico or a spacious condominium on the outskirts of the city, you can rest assured that the climate is suitable for outdoor living.
Mexico’s beautiful weather and magnificent scenery is enough to make anyone want to purchase an additional home and spend their vacation periods surrounded by Latin American culture. It’s such an vast country with mountains, deserts, and beaches, and has been named as one of the top ten retirement spots in the world. It all seems so appealing, however, there are a few things you should consider before purchasing a second home in Mexico.
Fideicomisohj—United States citizens can purchase property in Mexico by placing the property in a bank trust, also known as Fideicomiso. This is intended to allow foreign nationals to invest in property inside the restricted zones. The trust is a legal substitute for what is commonly known as fee simple ownership, but most often, the trustee is the legal holder of the property.
Property Taxes—A 2% acquisition tax is payable by the buyer when the property changes hands. Property tax on real estate in Mexico is much more reasonable than in the United States with the average being approximately 0.1% of the assessed value of the property at time of sale. It’s also good to keep in mind that if/when you sell the property you’ll owe capital gains tax that can add up to 35% of the profits.
Steps to purchasing a second home in Mexico:
- Offer and acceptance for buying a property —Mexican law recognizes verbal agreements but also requires that you send your offer in the form of an “Offer to Purchase” Once the seller has accepted your offer, they will accept the transfer of funds.
- Promissory Agreement—After the monetary transfer has been made, the promissory agreement is drawn in order to strategize a time frame to execute the buying contract.
- Purchase/Sales Agreement—Next comes the execution of the purchase/sales agreement which officially begins the closing process by transferring the title of the property to the fideicomiso.
- Closing and Title Transfer—Once you’ve verified that everything is correct and the closing costs have been agreed upon, the notary then issues a notarized copy of the closing deed.
- Delivery of Unit—Lastly, as the new owner, you will do a walk-through to ensure that the property is being handed over in good condition before you sign the delivery statement.
It’s always helpful to better understand how the transferring of properties works in other cultures and countries. We hope that this blog enlightened you as to the things to look out for and the typical steps to take when purchasing a property in Mexico. Need somewhere to store your items during the moving process and as you sort through your belongings and divide them up between the two homes? We can help! Contact any of our A-Team members today, 281-378-4343.