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| ARTICLES - Panama Real Estate |
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| Panama Mortgages: Foreigners 101 |
2008-03-02 15:28:00 |
Getting a mortgage in Panama used to be nearly impossible. Unless you had considerable savings or other assets, or could pay around 50% of the property price up front...you were out of luck. Times have changed with the demand. You still have to prove your ability to pay such a large sum, but banks are definitely willing to work with foreigners and help them buy the property of their dreams.
 According to an article in Focus Publications International`s The Visitor, The easiest properties for which to acquire financing are titled with improvements, existing infrastructure and located in either an urban or a developing area. If you are trying to buy raw land with little or no infrastructure, no improvements, and not in a developing area, forget it. Chances are the bank will decline your loan unless you have an established credit history with the bank, or substantial assets on deposit with the financing institution. Foreigners opening personal bank accounts with credit cards with a Panama bank establish a credit history.
Documentation requirements differ only slightly from bank to bank.
What you Need
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Copy of Passport.
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Copy of Panamanian immigration documentation.
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Last [2] Income Tax Returns.
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Signed and c ompleted a pplication f orm [provided by bank] .
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[2] Bank reference letters.
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Authorization to check credit references.
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Asset verification [copy of statements for investments, time deposits, savings and checking accounts, real estate titles, retirement accounts, lease agreements, bonds, common stock, etc] .
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Copy of Purchase & Sale Agreement and Receipt of Down Payment.
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Copy of a Reference Credit Report from your country of residence [Equifax or Transunion for residents of the U.S.A. or Canada].
The Process
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Get a quotation from different banks - what kind of mortgage you want, need, and can afford.
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Find a property, research it, get it appraised.
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Application - submission of all papers and forms. Note: some banks will now pre-approve, allowing you to know exactly your terms and budget before you start. Other times you need to add the property details and appraisal to the application package.
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Wait for approval, sometimes in as little as 5 days.
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Open a bank account, you are required to open a savings account at the same bank.
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Proof of purchased life insurance, if not through the bank.
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Proof of purchased fire insurance [80% property value], if not through the bank.
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Registration of the property transfer with the government ministry.
What you Should Know
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The usual age limit for an applicant is 75 years.
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Terms for loans vary between 10-30 years.
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Interest rates are fixed or variable. Fixed rates are normally only for the first 5 years. Rates are between 6.5% and 7.5% for variable rates, and 8%-9% for fixed.
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Down payments are normally 20%-30%. If you have lived in Panama two or more years, it`s possible to get 90% financing.
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Appraisals cost roughly $50 + 2% of the property value. Banks usually cover or reimburse you later.
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Most banks charge legal and closing fees. You are sometimes required to pay these in cash. Otherwise they are added to the loan and you will be paying interest on them. These fees are often between $2000-$3000.
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You must acquire life insurance for the full value of the property.
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You must acquire fire insurance for 80% of the property.
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Banks will allow you to send copies of your documents via e mail or fax to start the approval process, but at some point they will require the original, signed documents in their office. The documents can either be presented in person or shipped via DHL or FedEx.
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Early cancellation canceling the balance within 5 years usually has a penalty of 1.5-2% of the original loan.
Notes of Interest
Some banks now also require that your assets [primary residence in your home country, cash, stocks, bonds, etc.] be equal to or greater than the value of your mortgage.
For Venezuelans Moving to Panama: In addition to all of the above, the banks will require that the applicants assets be held OUTSIDE of Venezuela in order to qualify for a mortgage.
Special Programs for U.S. Citizens: Good News! Now U.S. Citizens can acquire U.S.- based mortgages for their property purchases in Panama.
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Terms: 30 years.
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Fixed Rate for 1, 3, 5 or 7 years. From 7.25% - 8.75% [at this writing] .
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NO AGE RESTRICTION!
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NO LIFE INSURANCE REQUIREMENT!
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LTV Ratio: 70% - 80%.
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Minimum Loan amounts do apply.
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Applicant should have a minimum Credit Score of 650.
Phew that´s a lot of information. And, it really can vary from bank to bank. You now have the gist, though. The fine print might vary slightly, but the general requirements are the same at all major banks. The following tips will help you on your journey.
Tips and Tricks
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Sit down with a mortgage or loan officer [as opposed to the Bank Manager or customer service rep]. They will be very helpful and you are sure to get the most accurate information. You can get good quotations and lists of details.
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Ask as many questions as you need. Does that individual bank require your current bank`s reference to be addressed to them specifically? Does the ID need to be photo ID? What are the hidden fees? Will the interest vary; if so, when? Are there late payment fees, etc? It pays to be annoying with your persistent questions. It also shows you know what you are doing and what you want, which can have its benefits in the deal you get. A discerning customer is likely to get the best deal. An over-eager, where do I sign? type will most likely get shafted with high interest and fees.
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Ask for contracts in English. You have that right. The Spanish documents are those legally binding.
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Try to get a deal on your interest rate. Shop around! Do the same for closing and legal fees. Some banks will wave these, and that`s normally thousands of dollars saved.
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Get copies notarized.
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Seek term life insurance, it`s so much cheaper.
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Make sure everything is in order before you start the application process. If you change something [even a small detail] you will have to start the application again. Be clear on to whom the property will be registered, etc., from the start.
Now you know what you need to buy a property, you have only to find one that takes your fancy! Don`t forget that we have a large selection of homes and properties to choose from here at ThinkPanama. Most importantly, we would be more than happy to help you navigate the intricacies of your purchase. Allow us to guide you to your perfect home.
For All your Panama Mortgage, Panama Real Estate or Panama Lifestyle needs, contact
Douglas M. Choy at
ThinkPanama.com. He will be happy to provide any guidance and information you may need.
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