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Frequently Asked Questions About Mexico

Mexico is rapidly becoming one of the most popular countries for Americans, Europeans and other foreign nationals to purchase vacation homes. While Mexico real estate can be a lucrative investment, some foreign investors may feel uneasy about buying "south of the border."

Here's what you need to know about purchasing property in Mexico as well as some general information about the country.

Buying Property in Mexico

Q: Can citizens of countries other than Mexico buy and own real estate in Mexico?

A: Yes, citizens of countries other than Mexico can purchase property in Mexico by placing the property in a bank trust, also known as Fideicomiso.

Q: Can foreigners own real estate near Mexico's borders or on near the ocean?

A: The Mexican Constitution previously banned foreign nationals from owning property that was within what has come to be known as the "restricted zone." The restricted zone encompasses all land located within about 62 miles of any Mexican border, and within about 31 miles of any Mexican coastline. This old law was intended to protect Mexican land from foreign invasion.

Because the constitution could not be altered, the Mexican government introduced a system called the "fideicomiso," (FEE-DAY-E-CO-ME-SO) which is, roughly translated, a real estate trust, so that foreign nationals could invest in property inside the restricted zones.

The trust holds the deeds to the property, and the buyer and/or other named persons which the buyer specifies are sole beneficiaries to the trust (and therefore the property). The beneficiary has full rights to do whatever he likes with the property: it can be developed (in accordance with local planning regulations), rented, leased, sold, or given away. In other words, the buyer own the property in all but name.

Unlike some countries, buyers do not have to be residents in Mexico to own property there, so there is no need to qualify for resident status under immigration laws. The trust enables the buyer to name a beneficiary upon his death.

Mexican Law on property ownership is comprehensive and provides protection for the seller and the buyer in all property transactions, provided that the law is followed and all necessary documentation is created.

Q: How does the trust work?

A: The property's title is submitted to a trust with a Mexican bank, whereby the bank acts as trustee. The trust is formalized with a permit from Mexico's Ministry of Foreign Affairs. The home buyer is named as beneficiary. The beneficiary's rights are recorded in the public record by a notary public.

Q: Who is involved in a bank trust?

A: Three parties - The seller of the property is the "trustor," the bank is the "trustee," and the buyer, is known as the "beneficiary" or Fideicomiso.

Q: How much does it cost to set up a bank trust?

A: Banks charge buyers an initial fee of roughly $500 USD for writing the agreement and establishing the trust. A percentage based on the property's value is then added on. Also, the bank charges an annual fee based on the value of the property to cover its services as trustee.

Q: What are the buyer's rights?

A: The trust is a legal substitute for what is commonly known as fee simple ownership, but in many cases, the trustee is the legal holder of the property. Beneficiaries have the right to sell the property without any restrictions. They can also transfer their rights to a third party or pass it on to heirs through a formal will.

Q: Is the trust renewable?

A: Yes. Foreign Investment Law passed in 1993 allows trusts to be renewed for an indefinite number of 50 year periods. It is essentially infinitely renewable.

The beneficiary (buyer/owner) has a contractual right under the trust agreement with the Mexican bank to all benefits that may result from the use or sale of that property, even though he does not officially hold title to the property.

A real estate trust is not a lease. The beneficiary can instruct the bank to sell or lease the property at any time. The beneficiary can develop and use the property to his liking and benefit, within the provisions of the law.

Generally, Mexican law allows most activities engaged in by foreigners. The bank, as trustee, has a fiduciary obligation to respect the rights of the beneficiary.

Q. What professionals are required to complete a real estate transaction in Mexico?

A: Typically there are four players involved: 1) a real estate company, 2) The buyer or the buyer's attorney, 3) a bank, and 4) a notary public, a government appointed lawyer who processes, reviews and certifies all official documents to ensure the property transfer of the property.

Q: What documents are needed to purchase property in Mexico?

A: Much of the paperwork is similar to that used in the U.S. The documents required by law to purchase property in Mexico include a non-lien certificate based on a title search from the Public Property Registry, a statement from the municipality regarding property assessments, water bills, and other pertinent taxes that might be due, and finally, an appraisal of the property for tax purposes.

Q: If a foreign national decides to sell the property, are there restrictions on who he can sell it to?

A: There are no restrictions. If the buyer is also a foreigner, the seller simply assigns the beneficial rights to that person. The foreigner automatically receives his own renewal 50-year permit, as opposed to the balance remaining of the seller's 50-year period. If the new buyer is a Mexican national, the seller can tell the bank to endorse the title in the buyer's name.

Q: Who pays the closing costs when buying or selling a property in Mexico?

A: It is common for the buyer to pay the transfer of acquisition tax and all other closing costs, including the notary's fees and expenses. The seller typically pays capital gains tax and the real estate broker's commission.

Q: How much is the transfer tax?

A: The real estate transfer tax is usually between 1% and 4% of the tax appraisal value, which is typically less than the sales value.

Q: How much are closing costs?

A: The rest of the closing costs, excluding the transfer taxes, vary from 3% to 5% of the appraised tax value. These percentages are applied to whichever is greatest of: 1) the sale price of the property, 2) the official tax appraisal value, or 3) the value determined by property assessment authorities.

Q. Is title insurance available in Mexico?

A: Yes, it's available and recommended. The insurer will research the title to the property and ensure that it is free and clear. Should anybody ever dispute that title, the buyer will have an advocate who will defend his claim in the local courts. Rates range from about $5 to $7 per $1,000 of coverage, depending on the value of the property and the individual firm.

Q. Is financing available for foreigners buying property in Mexico?

A: Foreigners can get financing from a Mexico lender, and often developers have specific companies that they can recommend and that have pre-approved the project. U.S. lenders are just starting to offer loans on property in Mexico, and more U.S. lenders are expected to soon join the market. Buyers should discuss financing options with their realtor and the developer of the property that they're buying.

General Information About Mexico

Q. Where is Mexico located relative to the U.S. and the rest of the world?

A. Mexico is located north of Central America, between Guatemala and the US

Q. How big is Mexico?

A. Mexico spans 761,606 square miles - nearly three time the size of Texas. The country also boasts over 5,797 miles of coastline.

Q. What is the capital of Mexico?

A. Mexico City is the country's capital and is located centrally within the country.

Q. What kind of money do they use in Mexico?

A. Mexico uses the Peso, which equals roughly $.09 USD.

Q. What is Mexico's climate?

A. Mexico has been graced with an unusually temperate climate year-round. Keep in mind that the Mexican summer is also rainy season, although rain rarely lasts more than a few hours, and typically starts in the late afternoon.

Temperature extremes are present only in the North and in Baja, where the temperature can rise above 100F.

Mexico City has a year-round temperature in the high 80s, while the coasts usually stay in the mid-90s. Temperatures fall somewhat at night, but rarely go down below a 60F.

Q. What are some popular destinations in Mexico?

A. Cancun, Acapulco, Mazatlan, and Puerto Vallarta as well as Baja California are all popular. The beaches are among the best in the world, however, there are also plenty of destinations inland as well.

Q. What's the population of Mexico?

A. Mexico has approximately 109 million people and a 1.97% growth rate. Life expectancy for Mexicans is roughly 73 years for men and 78 years for women.

Q. Are there any religious influences in Mexico?

A. Yes. A large portion of the population is Roman Catholic (89%) while only 6% of the population is Protestant.

Q. Are Mexicans well educated?

A. 87% of the population (age 15 and over) can read and write.

Q. As a citizen of another country, am I exempt from Mexican Law?

A. No. Regardless of your country of citizenship, whenever you are on Mexican soil, you are bound by Mexican law.

Q. Is Mexico the country's official name?

A. No, Mexico is officially known as United Mexican States (Estados Unidos Mexicanos in Spanish), but is conventionally referred to as Mexico.

Q. What kind of government does Mexico have?

A. Mexico is a federal republic operating under one centralized government.

Q. Does Mexico have states like the U.S.?

A. Mexico is broken down into 31 states and one federal district.

Q. What kind of legal system does Mexico have?

A. Mexico has adopted a mixture of United States constitutional theory and civil law system.

Q. Is Spanish the only language spoken in Mexico?

A. Although Spanish is the most widely spoken language in México, there are over 60 indigenous languages and dialects, including Mayan (the ancient language of the Maya) and Nahuatl (the language of the Aztecs), spoken as the every day language in many places in México.

Q. Does Mexico celebrate any national holidays?

A. Mexico's national holiday is Independence Day, celebrated on September 16 to recognize the country's independence in 1810.

Q. Describe Mexico's economy.

A. Mexico's economy is a mix of government-owned industrial facilities (notably oil), privately-owned manufacturing and services, as well as large-scale and traditional agriculture. Mexico's largest trading partner is the U.S., making up three-quarters of the nation's imports and exports. The country's largest producers of foreign exchange are petroleum, vehicle assembly and tourism.

Q. What are the roads like in Mexico?
A. Mexico has a mix of paved, semi-paved and cobblestone roads. The vast majority of major cities, resort and residential areas have paved roads.

Are you interested in purchasing a second home in Mexico? To see what's available, visit our Featured Properties of Mexico.

* The information above is general background about purchasing property in Mexico and is not meant as a substitute for the advice of your attorney or accountant, who can take into consideration your individual situation.

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