How to: Mortgage financing in Panama
Panamanian banks are easing restrictions on lending to foreigners since many of the investors who choose to buy property in Panama are not residents of the country. Currently non- residents may qualify for a mortgage of up to 70% financing of the purchase price and 25 year maximum term. There is an age restriction for applicants at 75 years of age. This means in order to qualify for the full 25 year term, you must be 50 years of age or younger.
For example, if an applicant is 60 years old , the maximum term he or she could obtain is 15 years (75 year old maximum - 60 years old = 15 year term). Loans obtained from a Panamanian bank DO NOT REPORT to the credit bureaus from your home country. The mortgage will only show on your Panamanian credit report and will help establish a credit base for any future financing in Panama.
The following loan types for purchases and refinances are available today:
- Residential
- Commercial
- Land
- Construction
- 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, as any missing requirements will cause a delay in the approval process.
Once the buyer has satisfied all of the banks documentation requirements, there is generally a 14 day turnaround on approvals. During this 14 day period, the banks 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
- Additional requirements as per the bank's discretion
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)
The terms could vary from those above depending on the bank and the type of loan you're seeking. Panamanian banks will make loans on land, beach homes, city homes, mountain homes, investment properties, and construction loans. There are over eighty banks in Panama and few bank officers that are able to speak English, which means that getting a mortgage on your own directly with the bank could also be overwhelming. Its best you find a mortgage specialist situated in Panama that has access to all the local banks and might find you the best terms and loan programs in the market.
