North American house hunters who come to Costa Rica in search of real estate bargains often find out that the financing process is not like what they are used to, at least not in terms of mortgage lending. Although there is a mortgage lending industry in Costa Rica, it is not as sophisticated or accessible as in the United States or Canada. To this end, cash is often king in some real estate transactions.

In April 2015, a popular article written by Anya Martin of the Wall Street Journal told the story of a property purchase settled with cash at the closing table in Costa Rica:

Todd Harris and Mary Bradley [dreamed of owning] their slice of paradise called Villa Alegria in Costa Rica. Financing their vacation home, however, wasn’t as dreamy.

When buying their Mediterranean-style villa in Dominical, a popular surfing destination on the Pacific, the Atlanta couple approached a Costa Rican bank—and were offered a mortgage with an above 7% interest rate. At that time, April 2014, average rates for a 30-year fixed-rate jumbo mortgage in the U.S. were 4.45% […]

So Mr. Harris, a 37-year-old independent investor, and Ms. Bradley, a 34-year-old stay-at-home mom, paid cash for the vacation home.

The bank that made the mortgage offer to Mr. Harris and Ms. Bradley was not named by the Wall Street Journal. Few banks in Costa Rica offer mortgages to non-resident foreigners, unless the applicants show that they have plenty of reserves and are able to pledge additional collateral just to borrow 50 percent of the purchase price.

Cash transfers of property are not uncommon in Costa Rica or across Latin America and the Caribbean, and neither is seller financing. In many cases, sellers are willing to entertain offers of a 50 percent down payment on a recorded note subject to certain terms and conditions, typically between three and five years.

For buyers who have sufficient cash on hand, there is a certain advantage of not having to deal with the process of qualifying for a mortgage and dealing with loan brokers, underwriters, processors, and title agents; to this effect, the cash element can make the process go faster.

According to the staff of RE/MAX Ocean Surf in Tamarindo Beach, what is not common in Costa Rica is a suitcase full of cash at the closing table. Checks are not common, either; wire transfers involving a public or private bank are preferred.

It is important to note that deposits, withdrawals or transfers in the U.S. that are higher than $10K are subject to a Currency Transaction Report that is furnished to the Internal Revenue Service. The U.S. bank may also file a Suspicious Activity Report for the Treasury Department if they see something that catches their attention.

For more information about real estate cash transactions in Costa Rica, contact:

RE/MAX Ocean Surf and Sun
#1 Sunrise Center
Beach Road, Tamarindo
Toll Free: 1-866-976-8898
Local: 2653-0073 / 2653-0733
[email protected]