Several times a day, we receive inquiries from the US, Canada, and Europe, and the same question seems to be in everyone’s thoughts. Obviously, bargain hunters would love to hear a positive response, but thankfully, all is well in Guatemala.

The reasons are quite simple, and if you are sitting on the sidelines waiting for things to change, you may be waiting a long time. In Antigua Guatemala, the majority of properties are purchased for cash. They are, in many cases, second homes for people from the Capital, and also foreigners who like to winter in Guatemala, and return to their home town in the spring/summer season.

It’s a little hard to create a foreclosure on a fully paid for house, but there are still people who require a mortgage, and it’s a good idea to know how the process works.

In most cases, if you’re looking at a new housing development, the owner / developer has reached an agreement with one or more banks to provide mortgage funds for qualified purchasers. As a general rule, a purchaser, with an excellent credit history, can make a down payment of 10% to 20%, and receive financing for up to 25 years. Unlike the US, these mortgages are generally not fixed, and they are pegged to the US dollar.

This can be dangerous territory with a sinking US dollar, and in the long run, your rate of interest can exceed reasonable levels during the life of the mortgage. There are fixed mortgages available, and your premium to acquire a fixed rate is about 2 percentage points above the variable rates at the time the mortgage was granted.

If the appraisal is well below the asking price of the property, you can’t blame the seller for trying to extract an unreasonable amount of money for the property, as his evaluation contains the factors that the appraisal company does not consider relevant when making their evaluation.

Here is an example: Agreed selling price $250,000.00. 80% Bank appraisal value $200,000.00 30% down payment $60,000.00, plus the difference between the bank appraisal value and the agreed selling price, which amounts to $50,000.00. Suddenly, you’re looking at $110,000.00 of equity in a house worth $250,000.00. This works out to 44% equity, with the bank having a 56% loan exposure.
The market would have to slide 44% before the banks receive any risk exposure. Now, you can see how this financing structure does not put Guatemala in the eye of the US mortgage storm.

If you’re considering a “pre owned” home, there is another set of rules that you should be aware of.

The lending institution will require you to provide an appraisal of the property through one of the approved companies who do valuations in the country. The appraisal is only a land, brick and mortar appraisal, and has no relationship to things like the historical value of the building, or the area of the property in relationship to realistic added value. This is a simple calculation based on replacement value only.

Certain areas in the center of Antigua will have a relatively high land value, versus another property on the outskirts of town. Once that figure is arrived at, then the amount of construction, and the quality is taken into consideration to arrive at a combined price that the bank will use to establish a loan. In most cases, the appraisal is discounted about 20%, and then the bank requires between a 20% and 30% down payment.

Come and join with us a good cup of coffee while we explain to you in detail the different avenues for buying a home with financing in Antigua Guatemala.