Owner Financing and Bank Loans for Foreigners, Expats and Panamanians
There are two primary options for financing property in Panama – owner financing or a bank mortgage. Most of the transactions with foreigners do not include bank financing. However, if you have a real estate agent who is familiar with the bank mortgage process it can be a good option.
It’s even better, much simpler, and less costly if you have an agent familiar with sellers willing to finance themselves. 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 knowledgeable real estate company working with a capable attorney 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.”
We often see clients who have discovered their perfect property, but are hesitant or think they are unable to proceed with an offer until they have sold their current home. We’ve helped hundreds of clients successfully address this situation.
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 two or three years, and you have sufficient funds for a down-payment, then maybe you can purchase with owner financing.
Sometimes owner financing involves monthly payments toward the balance. At times, the buyer simply makes the final payment without monthly payments being made and after they’ve sold their current house. Either scenario usually involves an interest rate that is typically similar to interest rates that a bank would charge.
Owner financing 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.
Bank financing can be challenging for expats and foreigners. However, if you are willing to also put some funds in a Panama bank, have a good source of income, and have a Panamanian residency under a visa program, bank financing in Panama becomes a viable option when owner financing is not available.
Foreigners can, under the right circumstances, 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.
For a bank mortgage, a typical downpayment is 30% of the price or appraised value of the property, whichever is greater.
Financing Through Your Current Property
Another option some buyers have utilized is to take out a loan or mortgage on their current home or property. You may find it relatively easy to get a home equity loan or line of credit on your existing property if you have sufficient equity in the property. Those funds can then be used to purchase a property or home in Panama.
Please Contact Casa Solution for More Ideas on Financing, to learn more about Owner Financing in Panama or for assistance in planning for your home or property purchase in Panama.