Mortgages and Financing in Panama
As the majority of the investors buying in Panama are not residents of the country, the Panamanian banks are easing restrictions on lending to foreigners. As of today, non – residents qualify for up to 70% financing of the purchase price for no longer than a 25 year term. There is an age restriction for applicants at 75 years of age.
In order to qualify for the full 25 year term, you must be 50 years of age or younger. If an applicant is 60 years old for example, the maximum term he or she could obtain is 15 years ( 75 year old restriction – 60 years old = 15 year term). Loans obtained from a Panamanian bank DO NOT REPORT to your credit report from your home country. Extra debt on your credit report will lower your credit score and make it more difficult to obtain other financing in your home country when calculating your monthly debts. The mortgage will only show on your Panamanian credit and will help establish a credit base for any future financing in Panama.
The following Loan types for purchases and refinances are available in Panama:
- Construction loans
- 2nd homes
- Investment properties
When applying for a mortgage, the bank will ask you for a number of documents detailing your financial background. It is imperative you provide them with everything they ask for, any missing documents will cause a delay in the approval process. Once the buyer has satisfied all of the banks documentation requirements, there is a 14 day turnaround on approvals. During this 14 day period, the bank’s credit committee will analyze your case based on your income and repayment abilities. Once approved , a loan term sheet will be issued by the bank for the buyers review. If the buyer agrees to the loan, he or she signs the term sheet, returns it to the bank, and is issued an irrevocable promissory letter for the loan amount approved.
The following documentation is required for the approval of a loan:
- 2 Photo ID’s (Passport and driver’s license)
- 2 Bank Reference Letters
- Tax Returns for the last 2 years
- Last two pay stubs (does not apply to self-employed)
- Asset Verification (bank accounts, retirement accounts, equity in your home, stocks, bonds, etc.)
- Purchase Contract
- Personal Credit Report
- Job Reference Letter
- Proof of any down payment made
Non-resident applicants can expect the following loan terms and conditions if approved:
- 25 year term maximum
- 70% of purchase price financing
- Life and Fire insurance required
- 6.25% interest rate ( All non- residents qualify for the same interest rate if approved, rates are not credit score driven)
Depending on which bank you apply with and the type of loan you are applying for , the terms may vary from the ones above. Panamanian banks offer loans on land, beach homes, city homes, mountain homes, investment properties, and construction loans.
**If you are considering financing your purchase, it is best to get prequalified for a loan right from the start to avoid delays in the process and risk losing the property to another buyer.
Mortgage prequalifications and approvals stay valid for as long as it takes the project to complete construction. Every 6 months the bank will check to make sure the client income and credit history hasn’t changed and will extend the approval for another 6 months. This process will continue until the property is ready.
As there are over 80 banks in Panama and few bank officers that are able to speak English, finding the right bank and obtaining a mortgage on your own may be a bit overwhelming. Our mortgage professionals speaks English, Spanish, Russian, Italian and Chinese.
About the Author
Kent Davis, founder and head broker at Panama Equity real estate, has been widely quoted in publications such as Time Magazine, Capital Financiero, and The Panama Guide for his unabashed views on the Panama real estate market. Panama Equity is regarded as one of the most active real estate agencies in Panama and Kent’s articles, reports, and market research projects have been syndicated by press agencies including Bloomberg and the Associated Press. Connect with the Author via: Email | LinkedIn | Facebook | Google+