Financing Property In Costa Rica

Bank Financing For Foreigner Buyers

Although the constitution allows equal access to credit for both foreigners and nationals, it is very difficult for foreigners to qualify with a Costa Rican bank. Income generated abroad is not considered by local banks. Some international banks with a presence in Costa Rica offer financing options for foreigners but the approval process is complex and lengthy. Foreigners having visitor status (tourist visa) may apply but it’s difficult to qualify. Foreigners with Costa Rican Residency status have better odds but would need to demonstrate income or collateral from a national source, a significant financial footprint in the country, and in most cases a Costa Rican co-signer.

Seller / Owner Financing

On occasion, payment terms may be negotiated with a seller but are usually short term, less than 5 years with a minimum of 50% down payment. The seller would be the first mortgage holder which is recorded on the title upon transfer. The seller would also request that the buyer cover the related notary fees to record the mortgage. Seller financing is more common for development or condominium projects but not so much for individual sellers where the majority of all transactions are all cash deals.

Seller financing is safe but it’s important to properly manage the due diligence, transfer, and recording process through a qualified Costa Rican attorney who will draft and register the loan agreement or Hipoteca and ensure that both the buyer and seller are legally protected.

Costa Rica Property as Collateral

Only property with a Registered Title is considered good collateral in Costa Rica which allows for the recording of mortgages, debts, liens, easements, etc. Beachfront or Concession property do not qualify, not even for Costa Rican citizens because the land is owned by the government. Un-titled or property held under “possession rights” are also non-attachable and therefore it is not possible to register a mortgage in the National Registry.

Deed of Trust – Alternative to Traditional Mortgage

Historically, a traditional mortgage was the only instrument to secure a loan from a Costa Rican or international bank or even a private party lender. However, in recent years, an alternative method for private lenders to guarantee payment is becoming popular; for the property to be held in an Independent Trust or Fideicomiso de Garantía during the loan period. This structure protects both the buyer and the lender by clearly defining rights and obligations. In some cases, it can reduce transfer costs since the property remains in the Trust until the loan is fully repaid. Familiar to many U.S. buyers as a “deed of trust,” this arrangement is more efficient and offers better security for the lender due to a more streamlined method to foreclose in case of default.