The reality is that most foreigners who buy in Panama buy without a loan or financing. Those with the means to purchase property without a loan are in a better position to get the best pricing and terms as well as to complete a transaction quickly. However, bank loans or owner financing are viable alternatives in many cases. Owner financing in particular can be quick and relatively simple to do when the seller is willing.
Owner Financing and Bank Loans for foreigners and Panamanians
There are two primary options for financing property in Panama – owner financing or a bank mortgage. Panamanians or foreigners who earn their income in Panama are in the best position for getting a bank loan. Most of the transactions with foreigners do not include financing. However, if you have a real estate agent who is familiar with the bank mortgage process it is a good option. Even better if you have an agent familiar with sellers willing to finance themselves as owner financing can be relatively quick and easy.
If you can identify a property for purchase and the owner is willing to finance some of the price, it is a simple matter for a capable attorney working with a knowledgeable real estate company to structure the purchase. All of the terms are subject to negotiation such as the interest rate, insurance to be maintained on the property, the downpayment, the term of the financing meaning over how many years it will be paid, and the purchase price. Usually owner financing carries no early payment penalty.
The real estate professional will help you to understand your options and conduct negotiations. An attorney should handle the registering the transaction and will sometimes hold or escrow documentation of the property.
“I have found a property I would like to purchase, but I need to sell my house first.”
Owner financing is a great option for potential buyers who know they want to purchase a home in Panama, but need to sell other assets such as a home in another country before proceeding. If you feel confident that your current home will be sold in a particular time period, for example, within three years, and you have sufficient funds for a down-payment, then many buyers choose to find a home with a seller willing to do owner financing for, in this case, a three year term with the bulk of the funds due at the end of the three years. This offers you a way to secure the new home of your dreams and occupy it while providing you with plenty of time for the sale of your original home. If the original home sells earlier than expected, then great…you just pay off the balance early with no penalty.
Bank financing in Panama – Getting a mortgage in Panama
The banking system in Panama has long been considered very sophisticated, stable and is accustomed to providing mortgages for both foreigners and Panamanians.
For Panamanians, it is commonplace to get a bank loan for a house purchase in Panama. The Panamanian government and the banks offer a variety of tax and incentive programs to make it easier for working Panamanians to afford a home.
Foreigners also often get bank loans from Panamanian banks. If you are thinking about purchasing property in Panama using a Panamanian bank loan, then you might consider bringing some documents with you to Panama to be one step ahead. It is typical for a Panamanian bank to require that you open a bank account as part of or prior to the loan application process.
To open a bank account, you will usually be asked to provide one or two letters of reference from your bank(s) in your home country. The letter simply states that you have been a banking client in good standing for a certain number of years in your home country.
Some banks will require that you either have a contract in place to purchase a property, own a property already in Panama or have a rental agreement in place as part of the process of opening a bank account. They will also usually ask for one or two simple letters of reference from someone in Panama. A typical downpayment is 30% of the price or appraised value of the property, whichever is greater.
Bank financing in Panama is a good option when owner financing is not available.