US bank financing comes to Panama

US Banks have begun to operate in the Panamanian real estate market. This is partly due to the current market in the US and US banks recognizing the security and stability of lending in Panama. There are currently several US banks offering mortgages for foreigners purchasing and refinancing in Panama, Costa Rica and Dominican Republic. Loans are available to investors, second home buyers and owner occupants up to 80% of the purchase price.
Financing with a US BankIt is important to educate the local market about US mortgage brokers. Developers and real estate agents in Panama are used to dealing directly with a local bank. Many US banks will only offer their mortgage products on a "wholesale" basis to approved brokers to offer on the "retail" level to the client. These mortgage brokers have been thoroughly screened, and approved by the individual bank and given permission to market the bank’s products. US mortgage brokers are authorized representatives of the banks and are licensed and regulated by the strict lending laws in the US. Mortgage brokers have the ability to offer the mortgage products of several different banks, saving the client from having to visit each bank individually. It also helps if a potential buyer is pre-qualified before shopping for a property. Being pre-qualified can save both the client and the developer/agent time and potential pitfalls later. The process is free and can be done within minutes over the phone or in person. There are several reputable mortgage brokers now operating in Panama who are providing this valuable service. Mortgage brokers offer different loan products and rates so it is a good idea to shop around.
US banks do not require life insurance and do not have any age restrictions. Payments are amortized over 30 years with various fixed periods available. Mortgages do not have any "Fesi" tax on top of the interest rates. Once the fixed periods are up, the rate can adjust 2% per year, 6% maximum over the life of the loan. Rates for foreigners with US banks are usually about 1% higher than rates in Panama. Payments, however, are comparable due to no life insurance requirements with US banks. US banks do not require that buyers have a bank account in Panama. Pre-payments penalties on a US mortgage are for the first 3 years only, set at 3% of the original balance the first year, 2% the second year and just 1% the 3rd year. Borrowers are allowed to pay off extra principle up to 20% per year without penalties during the 3 year penalty period. American banks will only lend on titled property and all loans require title insurance. Loans are not currently available for raw land.
Clients should also check with their country of origin as certain tax benefits may apply by having a US based mortgage.
Full approvals can typically be obtained with US banks within 72 hours. The average time from contract to closing is between 4-6 weeks. All closings are held in Panama and all properties will require building insurance. Buyers do not need to be in Panama to close, and applications can be done on line.
Documents required for approval include:
• Copy of passport and 2nd form of ID• 1 month most recent pay stubs, and last 2 years W-2 forms if salaried.• 2 year complete tax returns business and personal if self employed• Pension letter and SSI awards letter for retirees• 3 months bank statements business and personal• 3 months statements for any investment accounts• Appraisal (must be done by an approved appraiser)• Copy of sales contract• US credit report with a 660 minimum middle score (lender to provide)
The overall benefit of foreign banks entering the Panama real estate market is the availability of increased options to potential buyers. Buyers will have the ability to compare several different products from local and foreign banks to determine what product is most suited to their needs. Increased finance options to foreigners help drive more sales as well as bring a mortgage model that foreigners are used to.
For more information contactSean@4cornersbusinesscouncil.com wwww.4cornersbusinesscouncil.com