Tough Times Make Home Loans Harder to Get

In the wake of the economic downturn, credit is tight coming into 2009, and acquiring a home loan in Costa Rica appears to be more difficult than in previous years. Arturo Guzmán, founder of Properties in Costa Rica real estate agency, says the financial crisis has changed the entire purchasing process.

“The credit available from Costa Rican banks is very limited and very expensive, especially when it is to purchase vacation homes,” Guzmán says. “In the past, many real estate transactions were done in cash, thanks to the availability of second mortgages and refinancing back in the United States. But in these times, people are asking about financing available here in Costa Rica.”

Aware of the difficulties in the housing market, President Oscar Arias has requested that banks cut interest rates on existing home loans and loans for small businesses by 2 percent.

All public banks – Banco de Costa Rica, Banco Nacional, Bancrédito and the publicprivate Banco Popular – will offer clients at least 2 percentage points lower on home loans less than $50,000 over a two-year span. Beginning in March, Banco de Costa Rica will up the bar and decrease interest rates on new home loans by 3.25 percent, according to the bank’s general manager, Mario Rivera. Interest rates on loans of up to ¢50 million ($91,000) for small- and medium-sized businesses will drop by 5 percent.

Both programs ensure that, during the first year, rates will be capped at 15 percent for home loans and 17 percent for small businesses. The rates apply only to loans in colones.

Rivera says periods of crisis are not a time to slow business, but rather to show more solidarity, and this is why the bank is offering credit breaks that will benefit the majority of Costa Ricans.

“It’s important that in difficult times such as these, families can better manage their resources, save some percentage of their income, better control their spending and establish their priorities,” he says.

Banco de Costa Rica is one of only three banks presently offering home loans to nonresidents. Its Crédito Vivienda No Residentes program, available to U.S. citizens and Canadians, offers loans of up to $300,000.

Banco Nacional offers nonresident home loans of up to $500,000 to anyone purchasing a condominium from a development owned by one of its customers.

The only private bank currently offering home loans to nonresidents is Scotiabank, which offers loans of up to $2.5 million. The process for acquiring a home loan through Scotiabank is lengthy, and the loan must be approved by the head office in Canada. Application approval is based on the client’s credit history and income in the United States or Canada, among other considerations. The bank offers up to 75 percent financing for homes $500,000 and under, and as little as 65 percent for properties up to $2.5 million.

Legal residents have various loan options and can get loans from private or state banks, with Banco Popular and Bancrédito offering up to 80 percent financing.

Some banks, such as Banca Promérica and Grupo Financiero Citibank’s Banco CMB, are currently not offering home loans at all.