If you live in Panama and you work in Panama, it’s easy to get a mortgage from a bank. Generally, we suggest going to your bank instead of a new bank as the diligence process is a lot easier. Banks, of course, are going to look at what they always look at; income, credit history, maybe some savings, what your liquidity is looking like, and of course what you’re purchasing.
If you fall into that category, you might only have to put down 10% to 15% or a maximum of 20% against the purchase price. You can buy something existing or something in construction. The bank rates these days, if it’s your primary residence are around 5% – 5.5% or maybe a bit better.
However, if you live outside of Panama or if you live inside of Panama and your income originates from outside of Panama, you might have to get a bit creative. Banks might finance you if you’ve got a history with the bank, such as a couple of years, if you’ve got a residency status, ie. you’re a permanent resident, or if you’ve been with your current employer for quite some time. However, there are some hoops that you’re going to have to jump through to get that financing. I’ll walk you through the traditional financing path and then I’m going to tell you about some other options that we’re starting to see from both developers and individual sellers.
Traditional financing in Panama for a foreigner who works abroad is an uphill battle. First of all, if you do get approved, you’re probably going to have to put down 40% of the purchase price. You’re also probably going to end up paying a slightly higher rate. This rate could be as high as 6.5% to 7%. On the other hand, your terms will be traditional in terms of the payback period. Here in Panama, it’s usually 20 years and you can speed that up a little bit if you’re in the position to do so. Banks offer products where you can also put down a deposit and they’ll lend against that, but where’s the leverage? So that’s what you’re looking like typically on financing with a bank.
Now, what we’re seeing is that developers in Panama are starting to give financing, which is great because that is essentially a pathway to getting traditional financing. Through this, you can build your credit history which makes you more attractive to banks.
Developers are offering shorter loan payback periods. So usually the developer will only finance five years out and oftentimes you do not get possession of that property until you’ve paid off the entire loan. Generally, there is a large balloon at the end. However, developers are getting creative these days.
Seller financing is the new mortgage in Panama! Tune in to see how buyers are financing their real estate purchases these days.They’re offering lease-to-own where a percentage of what you pay in rent gets applied to the purchase price. Generally, you have to lock it up with a deposit, say around 5% of the purchase price, and then anywhere from 50% to 100% percent of the lease-to-own rent that you pay gets applied to the sales price. And then once the developer financing kicks you’re looking at 7% interest on that loan. That’s kind of competitive with the banks, certainly not cheap but it’s a bridge, right? It’s a bridge to getting into the financial system here and a way to be deemed more attractive for traditional loans.
Sellers are also giving financing terms that are generally negotiated around current bank rates but usually a bit shorter. However, the seller might appreciate the bump up in the asking price because that’s usually what it entails and obviously charging interest on the unpaid remainder of the purchase price. Long story short, there are options ladies and gentlemen, fear not. Even though banks can be notoriously difficult to deal with.
What To Expect
A couple of things to expect if you want to go the traditional bank finance route don’t plan on getting it started before you come to Panama because banks and Panama for that matter are really slow on email responses. So that’s tricky to try and get your process started. When you come to Panama you need to meet your bank, perhaps open up a bank and even get their WhatsApp, right? That’s how you’re going to stay in touch. That said you come in, you can get set up. It can be done, however, it’s not easy.
Currently, the banks that are financing foreigners, I can count them on one hand. You’ve got ScotiaBank, Banistmo, Multi-Bank (kind of), and Capital Bank (perhaps). And when I say foreigners, if you’re a Panamanian and you live abroad and you’re making your money abroad you will be classified as a foreigner. They’re concerned about where your money is coming from most notably, is it a steady income? Long story short, just be prepared for headaches, be prepared for a long slog. And that is why non-traditional financing such as developer financing, lease-to-own and private seller financing is the new way to mortgage in Panama.
So anyway guys, thanks for tuning. We love comments, we love feedback and we are always curious to know where you’re watching from. And don’t forget, if you need any more information get in touch with us at Panamaequity.com.