Mortgages and Financing in Panama

Mortgages and Financing in Panama

By in Blog with 44 Comments

You’ve found your perfect slice of Panama real estate. Now, how do you go about actually buying it?

The good news: foreigners enjoy the same property rights as Panamanians, protected by over a dozen laws specifically written with foreign investors in mind. The banking system is sophisticated, stable and has a good history of providing mortgages for both foreigners and Panamanian nationals. And banks have been easing restrictions on lending to foreigners, with a host of options available for when the time comes to putting money down. There are loans for residential properties (including second homes), and commercial, land, construction and investment purchases. The bad: some of the mortgage and financing options are easier than others, as you’ll discover below.

Bank Mortgages in Panama

There is no shortage of banks willing to arrange a mortgage. Many foreigners opt to go with banks that have parent companies in U.S., Canada or Europe (such as Scotia Bank, HSBC, Citibank, BBVA), but Banco Nacional de Panama and Banco Cuzcatlan (Panabank), Banistmo, Banco General, and other national banks are also strong players in the residential mortgage market and may be able to offer more competitive terms based on your residency and how you plan on using the property.

The good news is that loans obtained from a Panamanian bank do not report to your credit report from your home country — the mortgage will only show on your Panamanian credit and will help establish a credit base for any future financing in Panama.

Whereas you might be used to your credit history determining your eligibility for a mortgage, in Panama, the banks look at your ability to pay and your property’s loan to value (LTV) ratio. This big difference means extensive documentation on your part, to provide proof of income, the value of the property, etc. That’s where residential financing becomes a tedious process.

There are a number of criteria, however, that foreigners need to meet to qualify for a mortgage first. 25-year terms are the maximum (and bear in mind that lenders often prefer 10- to 15-year terms), and, as a foreigner, your loan term must end by the time you are 75 years old (ie: if you are 65, you can only get a 10-year loan, while if you’re 50, you can get the maximum 25-year loan). Importantly, expats, especially expats who will be using the property as a second home or vacation rental property, will only be able to obtain a mortgage for up to 70% of the value of the property and the purchase price cannot exceed the appraised value.

Next, the property must be titled in the National Register (90% of land outside Panama City is untitled), and not be located within 10 miles of international borders. Other than that, there are very few additional restrictions.

The Documentation You’ll Need

  • To process a mortgage loan in Panama, most banks will require:
  • A photocopy of your current, unexpired passport, showing all internal pages, stamps etc
  • A photocopy of one additional form of photo ID
  • Two original bank reference letters
  • Asset verification (bank accounts, retirement accounts etc)
  • Credit report
  • Two original references from a commercial, professional or personal source
  • A photocopy of a utility bill showing a physical address matching the other documents
  • A complete CV or resume
  • Financial statements and tax returns for the past two years
  • Purchase contract, including proof of any down-payment made
  • A photocopy of the registered title deed and registered survey of the property
  • Certificate of title deed from the public registry of Panama
  • A property appraisal carried out by an approved appraisal company
  • Life insurance is also required naming the Panama bank as the beneficiary for the full loan amount. Since the policy is based on the applicant’s life expectancy, it is more expensive for older applicants.
  • Fire insurance policy on the structures for at least 80% of the loan amount is also required.

Note that Panamanian banks require all documents from other countries to be “authenticated” either by a Panamanian consulate or by “Apostille.”

If You’re Self-Employed, you are also required to provide these additional documents:

  • Information about the company (name, address, phone number, website URL)
  • Letter describing the company history and the type of business it’s engaged in
  • Last 2 years of audited financial statements
  • 2 reference letters from companies the applicant’s company engaged in business with
  • 2 original bank reference letters

Once the buyer has satisfied all of the bank’s 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 buyer’s 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.

Terms and Rates

Rates are not credit-score driven, and terms are similar to the U.S. and Canada. Interest rates will be determined based on a variety of factors, such as the type of property (residential, commercial, investment), the age of the construction, the term of the loan, the applicant’s age and status and the type of collateral offered to the bank as guarantee on the loan.  At the moment, rates very considerably in Panama depending on how you plan on using the property.  For investment properties, rates are generally around 7%.  If you are going to be occupying the property as a primary residence, rates will be around 6%.  And if you earning your living in Panama and live in the property full time, rates will be around 5%.

Mortgage Incentives for Retirees and First-Time Buyers

If you have a Pensionado Visa in Panama you may qualify for special discounts on mortgage interest rates. Note that if you are retired, you will need to get a letter from your government stating that you are receiving a pension that is payable for life. If you’re not receiving a pension, you must have a regular income and must provide proof of same.

If you’re a first time buyer you might also qualify for reduced interest rates and a discount on taxes. To do so, you must never have owned property in Panama before and the property must be newly-built, titled, and for residential use only. The loan has to be for between $25,000 and $62,000, cannot exceed 15 years and cannot exceed 95% of the property’s value.

Prequalification for a Mortgage

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 pre-qualifications 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.

Check out this link for the documentation you’ll need to get pre-qualified for a mortgage.

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.

Other Types of Financing

Because of the hurdles to get a traditional mortgage, many expats look to other alternatives: seller financing, developer financing, paying cash, or borrowing against their retirement.

Seller Financing

By far the most attractive of all the options – for both financing terms and ease of transaction – is if a seller is willing to help the buyer finance directly. We’ve seen this at work in cases where buyers need to sell assets in their home country, like existing homes, and are confident they’ll be able to do so within a time-frame, say three years, but have the down-payment ready now. If the original house sells faster than expected, there’s usually no penalty for early repayment.

If you decide to try this route, you’ll need a good attorney working with a knowledgeable real estate company to structure the purchase, as all the terms are on the negotiating table: interest rate, home insurance, the down payment, term, and, of course, price. The attorney would handle registering the transaction and escrow accounts, while the real estate professional will help you understand your options and conduct the negotiations. Under this type of financing, most sellers accept 10% as a down payment after the buyer has signed the buy/sell contract, though it’s entirely up to the seller – we have seen some accept 5% and others who won’t settle for less than 50%.

Developer Financing in Panama

If you’re buying a property from a developer that already has a relationship with a bank, it’s a different story to standard residential mortgages. These are usually large developments, often in the pre-construction or during-construction phase. If you’re in this boat, your loan can be granted in a matter of days. Some developers also offer shorter-term financing as a bridge loan, but at a similarly high interest rate. Expect to put down 30% and pay approximately 7-8% interest for a 3-5 year loan, with monthly payments and a large balloon at the end. The good news is you’ll only have to provide a deposit check and your passport as “documentation”. It’s a great way to establish a credit history in Panama and it might even lead to qualifying as a resident for mortgage purposes.

Some final food for thought: we’ve also seen buyers thinking out of the box and going with cash-out refinancing on existing properties back home, reverse mortgages, investor loans (secured by the property), or investing their self-directed IRAs into property in Panama.

About The Author

Kent Davis, founder and Managing Director at Panama Equity real estate, has been widely quoted in publications such as Wall Street Journal, Time Magazine, The Miami Herald and the Financial Times 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+

44 Comments

  1. Brian says:

    Do you have any leads or can you help with a Marine / Boat Loan in Panama?

  2. Ruoda says:

    Hello, 
    Great information on mortgages. My question is I currently own a home in Panama and want to get mortgage loan out on it. I live and work in Texas will that be an issue? I called Banco Nacional and they barely wanted to talk to me because of my foreign income. 

    • Kent Davis says:

      Hey Ruoda, it’s really hard to engage banks from abroad. I would suggest planning a trip down here and bringing proof of income (w-2s) as well as ordering an appraisal. We can help you organize that if you need it.

  3. Fred Mecklenburg says:

    Kent, I am 71 and my wife is 40. We file a joint return in the US. If we wanted to purchase property in Panama and finance, could the loan be taken out in my wife’s name only?

  4. brian h says:

    Kent, I am considering coming to Panama as I would like to buy raw land and build my own home.  I don’t yet know what area would be good and safe for my wife and I.  I’m recently retired, only 56 yrs old, and would most likely pay cash for some acreage and build our home with the proceeds from my USA home sale!  Where can I find good info on raw land, and what area is a safe area, close to water, but not necessarily beach-front?!  Thanks for all you do!!

    • Kent Davis says:

      Brian, thanks for your message. Regarding purchasing raw land in Panama: Depending on what other factors are important for you, you may want to consider the areas of Pedasi, Playa Venao, Playa Corona or perhaps even an area like Boca Chica. They vary quite a bit in terms of amenities, price, proximity to the beach, etc. Feel free to reach out directly!

  5. David Dickinson says:

    I was in Panama a year ago and am considering the country for retirement next year. If I purchased a lot for cash, how do the banks treat that as part of a down payment? Thank you.
    David

    • Kent Davis says:

      David, thanks for reaching out about your trip to Panama and your considerations on purchasing real estate here. Regarding banks and mortgages in Panama, I’d need a bit more understanding of your particular situation, but a general answer would be: if you own the land already with no mortgages, that would certainly qualify you for having assets in Panama and therefore make you more credit worthy for a mortgage. Some banks are still giving construction loans if you own the land outright.

  6. O. hurtado says:

    Hello, I am  very interested in purchasing a house,villa or condo in Panama to move into in three years upon retiring. Would like information on new communities, first stages close to the beach but not on the beach and not too far from a city.

    • Kent Davis says:

      Hello and thank you for your message. I’ve sent you a note privately regarding beach communities in Panama and have also included some developer financing options and mortgage information.

  7. Rachel says:

    I am interested in more information about live-aboard in Panama. How are slips and anchorages handled…as real estate or condos? Can slips be purchased and resold? How do I obtain listings and financing for live aboard or commercial use boats?

    Enjoyed reading your site!

  8. Andrew Scott says:

    Hello Kent

    I am interested in findig more information about mortgages in Panama. Could you please email me some information? Thanks in advance

    • Kent Davis says:

      Andrew, mortgage rates are starting to climb since they are all adjustable and based on Libor +. Right now, rates are around 7% on investment properties and 6% on your final home. Right now, there are still a handful of banks giving mortgages to foreigners so finding a mortgage down here isnt really an issue. It’s just alot of paperwork!

  9. Yani Rosado says:

    Hello Kent,
    I was planning on buying a house in the US six months from now but I am considering just buying a property that I can use for my retirement. I’ve been doing research and Panama seems like a like a safe and affordable place to live. I would like information regarding condos and villas that are financed by the builder.

    • Kent Davis says:

      Yani, thanks for your message. Regarding mortgages in Panama provided by the developer, IE developer financing…those options are certainly available on both beach properties for sale in Panama as well as Panama City Panama condos. I’ll have one of our real estate agents reach out to you to find out a bit more about your preference in terms of area, project type, and price point. Rest assured, there will be some options wherever you choose. Have a good one!

  10. Cherrie Preston says:

    Good afternoon,

    I am currently residing in the U.S as a citizen. I am a previous homeowner but the “episode” of 2008 hit me hard. am interested in a possible home purchase in Panama. I have family there and would like to move to be close. Are you able to provide any info?

    I greatly appreciate any help you are able to provide.

    Cherrie

    • Kent Davis says:

      Hi Cherrie, thanks for stopping by and asking your question regarding mortgages in Panama. US Citizen: No problem! Home purchase in Panama: That’s what we do! Most banks will want to see at least 2 years worth of tax declarations showing your income as well as a downpayment on the home of up to 30% these days.

      I’ll send you a private message to your gmail account, ok?

  11. Steven Rich says:

    Hi Kent,

    Just want to say that you are doing a great job with this blog and responses to the inquiries. As you know, I publish many online articles about Panama. I read a lot of blogs about Panama for inspirations and sources for ideas for future articles. You blog provides excellent information regarding Panama real estate. Keep up the good work!
    Steven Rich, MBA

  12. Don Thordarson says:

    My partners and I are considering buying a boutique hotel of Bed & Breakfast on the beach on the Pacific side. We had been considering buying something in the $2,500,000 to $3,500,000 price range and financing the purchase. However, we are all in out 60’s and 70’s. Would the 75 year rule apply on a commercial investment? What if one partner’s wife is mid 50’s would the maximum financing period still be only about 20 years? Any other ideas otherwise, we are going to have to downsize our potential investment. Please advise. Thanks,
    Don

    • Kent Davis says:

      Don, thanks for taking the time to reach out. Im going to answer your email in a private message and include our beaches agent Carlos. In short: yes, banks will finance commercial loans but generally do not take into account in the same way banks do in the US what income is being generated from the business, paying more attention to the principals other sources of income, in which case the age gaps still apply.

  13. Lisa says:

    I am looking at the Villa 3 story condo in Contadora. What is expected for a down payment. If I have my friendly visa. Could I qualify easier for a mortgage in Panama.

  14. Justin Kirkpatrick says:

    Kent,

    Hi I am interested in information regarding a loan pre-approval for a property in Boca del Toro. I am not a resident of Panama and only speak English.

    • Kent Davis says:

      Justin, thanks for your inquiry regarding a mortgage on a property in Bocas del Toro. While you aren’t a resident of Panama, that shouldn’t be the issue.

      Would you like me to introduce you to an agent who handles properties in that area? Mortgage brokers, specifically mortgage contacts within the banks operate on a local basis so she would need to put you in touch with someone directly at the bank.

  15. Miguel Wallace says:

    I need help purchasing a property in Panama, i have found a home but don’t know who to get a loan from the bank

  16. Dwayne says:

    Looking at purchasing vacation home in Bocas Del Toro region. Looking for mortgage lenders for pre-approval for canadian resident. Thx.

  17. Wendy says:

    Hi Kent,

    I would also love some more info on mortgages for land in Panama as a non-resident!
    Thanks!

  18. Tauni says:

    more information about how to get a loan please.

  19. Scott delorme says:

    Need to get pre approved for loan in country of panama.will be selling current house in u s a

    • Kent Davis says:

      Scott, thanks for taking the time to inquire on a loan in Panama. I’ve sent you an email at your yahoo account regarding mortgage and banking information!

  20. Kurt Sutherland says:

    Would like to know if there are any properties – condos – that I could buy with only $15,000 down.

    Thanks
    Kurt

    • Kent Davis says:

      Kurt, thanks for your message regarding properties for sale in Panama. To answer your question, most banks require at least 30% down to qualify for a mortgage. That said, if you are considering a property for sale in pre-construction, then $15,000 will be enough for the initial payments.

      Are you in a position to come up with roughly $20,000 additional over the next two years? I’ve just sent you a private message to the email you left as well.

  21. Paul Lussier says:

    Need larger commercial loan which can be structured as debt restructure of existing property or new development in Panama. Please contact me asap. Sincerely, Paul

  22. Martim Leal says:

    Hello,

    My name is Martim Leal, I’m Portuguese and I have a small company in the hospitality Industry. I have a Hostel in Lisbon – Bairro Alto – called “The Independente – Hostel & Suites” and a small Guest House in Sintra (historical place near Lisbon) called”The House Of The She Pine Tree – Guest House”. We have a restaurant in the Hostel, called “The Decadente” and it was recently voted one of the 20 best restaurants of Lisbon in 2012 by the British magazine “Timeout”.

    My younger brother was recently on honeymoon to Panama cCty and fell in love with “Casco Viejo”. For him and now also for me after everything I’ve seen and read on the internet, “Casco Viejo” is exactly as the “Bairro Alto” in Lisbon and as we pass the dream of having a small hotel in Central America (I lived a few years in Brazil and my wife is Brazilian), I took the liberty of sending you this email so that maybe you can pass me some information about buildings that might be for sale and who knows, help us in this adventure.

    here are our sites :
    http://www.theindependente.pt
    http://www.thedecadente.pt
    http://www.shepinetree.com

    “The Guardian” the English newspaper recently named us as the most luxurious Hostel in europe, follow the link below:
    http://www.guardian.co.uk/travel/gallery/2013/jan/24/10-of-the-best-luxury-hostels-europe-in-pictures

    I read on a website about all the tax benefits that exist in Casco Viejo and look fantastic, are they still standing?

    Well, we would like to make a Bank Loan, maibe in our company’s name. Do you think this is possible. And if yes, what kind of documents do the Bank need to make the credit avaluation ?

    Do you know a loan agent, that can help us in this adventure ?

    Cheers,

    Martim d’Eça Leal

    • Kent Davis says:

      Hello Martim,

      In fact, we do have a great contact for mortgages in Panama. I’ll put you in touch with them in a private email. Thanks for your comments and we look forward to seeing you in Panama soon!

  23. Rosa Barcelo says:

    Please put me with a good English speaking
    loan agent inorder to be prequalified for home and land loan.

    Regards,

    Rosa Barcelo

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