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The buying process in México

CAN FOREIGNERS OWN PROPERTY IN MEXICO?

Yes, any foreigner may obtain ownership of property in the interior of Mexico, they just need a permit from Foreigner Affair's Office. However, under Mexican law, foreigners cannot own direct property within the restricted zone (please read the next section to learn how to acquire property within the restricted zone).

THE RESTRICTED ZONE & OPTIONS TO BUY WITHIN IT

The Restricted Zone in Mexico (known in the past as the "Prohibited Zone") is set up as such in the Mexican Federal Constitution. It is the land area within 100-kilometers of Mexico's international land borders (US, Belize and Guatemala) and the land area within 50-kilometers of Mexico's ocean front areas (the coast lines of Mexico).

In the Restricted Zone foreigners can not own direct title to real estate located therein. They can however hold the title thereto via the long term bank title transfer trust or via a Mexican Business Corporation (depending upon the use of the property).

NOTE: Mexicans and people with mexican citizenship, can buy and retain direct ownership for properties within the restricted zone without the Bank Trust or the Corporation.

FIDEICOMISO (BANK TRUST).

In the trust, the Mexican fiduciary bank holds the title for the foreigners and performs all acts considered real rights, per the instructions of the beneficiary of the trust (the foreigner). The beneficiary of the trust can exercise the personal rights regarding the trust and the property placed therein. In other words the Foreigner has the rights to lease it, rent it, sell it, will it, etc... The cost for initiating a fideicomiso is around US$2800.00 and there is also an annual fee to the bank for maintaining the fideicomiso. The annual fee is based upon a percentage of the value of the home.

If the property in question is for Residential purpose, then the mentioned trust is the only way to hold title. In the case that the property in question is for commercial use, then the foreigner can either hold the title to the property in a Trust or through a Mexican Business Corporation, to which he can hold ownership (limitations apply).

ESTABLISHING A MEXICAN CORPORATION.

The first step is a permit from the Foreigner Affairs office in which you register the name of your Mexican corporation. Three possible names for the company are submitted and a computer search for those names to avoid duplicating an existing name. The corporation requires a minimum of two live, individual share holders, that are at least 18-years of age. If the principal officer of the corporation is not mexican, will be require to have an FM-3 Visa (please read the next section).

The next step is developing the articles of incorporation and this task requires the inclusion of a "Notario". Notarios are quite different than Notaries in other countries. The name is similar, however, the Notario in Mexico has incredibly vaster powers. The Notario is a keeper of the public record, a licensed attorney who passes the notario exam and is appointed by the state to represent it. Once the articles of incorporation are recorded in the public record, then it is time to obtain the necessary permits with other entities such as the Tax Department, Immigration, etc... All of the permit fees and the Notario's fee are around US$2,500

WHO'S INVOLVED IN R.E. TRANSACTIONS IN MEXICO?

Normally, there are three to five players involved in any real estate transaction in the restricted zone: A)The Real Estate company, B)The buyer's lawyer, C)The mortgage company, D)The bank or trustee, and E)The public notary. All five are helpful in their respective areas in assisting with real estate transactions.

Note: Transactions outside of the restricted zone do not involve a bank or trustee since it is not necessary to establish a real estate trust in those areas. Otherwise the transactions are much the same.

Foreigner attorneys are not licensed to practice law in Mexico and should not give advice on Mexican Law.

Any Mexican attorney can normally handle a real estate transaction. The buyer is not limited to only the local attorneys where the property is located. Federal law governs all real estate transactions involving a trust. This means that all such transactions are carried out the same way regardless if the property is in Cancun or Los Cabos.

GETTING FINANCING.

Purchasing a property in Mexico is an exciting decision, and with the growing and increasingly successful cross-border mortgage industry that has been developing in Mexico over the past few years, there are now more options than ever to finance your home!

Mexico has historically been a cash-based economy, but with the influx of investment by foreigners, financing has become a viable alternative. Many US lenders and banks have turned to the Mexican market, and their previous US experience makes the process more familiar than if one were to finance directly through a Mexican bank.

For some people, the introduction of financing into the Mexican real estate market represents the opportunity to pursue a dream that may not have otherwise been tangible. Financing in Mexico is currently available for Americans and Canadians, with USDollar loan programs and UK citizens and Spaniards with Euro-based loan programs. Purchase, non-cash out re-finance (better rate and term), cash-out refinance, and residential construction loans are available, and there are many methods used for qualifying. Commercial loans are also available for construction and existing properties.

It is smart to finance through a broker, rather than directly through a lender, because you have access to more options through many lenders, thus enabling you to truly find the program that is best for you. Also, a broker retains copies of all of your documentation, which makes it much easier to alter the direction of the loan if necessary – a lender does not return your documentation to you, thus requiring you to recollect everything should you choose to change lending institutions service providers.

Due to the downturn in the US housing market, current troubles in the US market, many mortgage brokers are beginning to turn to the Mexican market. Loan experience in the US or Canada is certainly valuable, but because the Mexican process is different in many ways, it is important for you, as a borrower, to be sure you choose a broker that is experienced in Mexico. The best way to ensure this is to ask the loan officer or broker how many loans they have closed in Mexico and to request contact information for references. Many brokers can open your loan and take it to a certain point, but then it dies; this is why it is important to inquire about the number of loans a broker has closed because this gives you a much better idea of the quality of their work. Also inquire about application fees and origination fees. Application fees should be no more than between $200 and $300.

VISAS.

Like many industrialized nations, Mexico has a comprehensive legal and statutory Immigration Policy affecting Mexicans and foreign nationals.

FMT or Tourist Visa. Tourist visas are intended for visitors to Mexico on short term visits (six months or less); usually tourists and short-term visitors. For trips of longer than six months, other visa should be considered. The FMT has a 'Business Visitor' section, specifically for persons who come to Mexico for short business visits not exceeding thirty days. FMT visas are issued by airlines and are also available at ports of entry.

FM3 (The Long-Term Non-Immigrant Visa). Mexico operates what is known as a FM3 Visa. The FM3 visa is a renewable long term (more than six months) permit which gives non-immigrant temporary residency status to the holder. This means that it gives a person the right to live in Mexico (under terms as set out in the visa) but it does not lead to, and cannot be converted to, a visa leading to permanent residency.

There are various categories under which FM3 visas are granted, and these relate to the activities you intend to undertake while in Mexico. Under the terms of the FM3, you are authorized to only undertake certain, specific activities which may be lucrative or non-lucrative, depending on the visa's classification.

FM2 (The Immigrant Visa). These visas are intended for people seeking permanent residency status in Mexico or those seeking eventual Mexican Citizenship.

There are various categories under which FM2 visas are granted, and these relate to the activities you intend to undertake while in Mexico. Under the terms of the FM2, you are authorized to only undertake certain, specific activities which may be lucrative or non-lucrative.

You must hold a FM2 for a qualifying period before you may apply for "immigrant" status or Mexican Citizenship. You do not need to have held a FM3 visa before applying for a FM2, and any years you may have accrued while living in Mexico under the auspice of a FM3 permit do not count towards your FM2 qualification period.

If your goal is to get the long term residency in Mexico or to become a Mexican Citizen, you should apply for FM2 Visa (or request a change of status from FM3 to FM2) so that your time starts counting towards the qualification period as soon as possible.