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Costa Rica Mortgage on Undeveloped Land

Mortgage on Undeveloped Land

Why do most of our Costa Rican lenders resist mortgages on undeveloped land? There are a few exceptions to this rule, but they are few and far between. Could you explain this to me? Lenders may only approve your mortgage application if you build. As a result, the approval process can be more cumbersome than standard home loans.

Land Generates Expenses, Not Income

The land is a “money pit” – it does not earn any money. It needs money to stay afloat regarding taxes and maintenance. Compare this to a house, for instance, that can make money as a rental before you sell it.

Also, land generally requires a substantial initial investment (in construction) to turn it into an income generator. Lenders who take back a piece of land due to foreclosure have few options: either sell the land quickly or invest a substantial sum in developing it.

Land is Speculative

Here is the issue with the land: It’s a 100% speculative investment. Land investors are 100% hoping the value will go up to provide them with a fair rate of return. Lenders are not generally speculative with loan collateral.

There’s Plenty of Land in Costa Rica

While there is a theoretical limit to how much land there is in the globe, Costa Rica, by extension, has much of it. When selling land in a buyer’s market, you’re up against a large inventory of lots for sale.

Lenders value land less than a house, for instance. In a foreclosure, raw land can be much more challenging to sell at market prices. A lender wants to recoup their investment quickly if the borrower cannot repay the loan.

Who Might Consider Costa Rica Land as an Investment?

Land may be suitable for housebuilders and long-term corporate land investors with substantial development experience and well-diversified land holdings to decrease overall risk. Also, if you discover a great price on a residential property on which to build your dream house and are prepared to take a chance, it may be a rewarding investment.

But for the regular investor, buying land implies more risk than reward. This is why lenders prefer to lend on properties with residences or construction of commercial value.

-Written by Glenn Tellier (Founder of Grupo Gap)



*Loan Request Form

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    Referral Name:

    Your Name:

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    Loan Request

    Amount Requested:


    Use of Funds:

    Collateral Property Details

    Property Location: Please include Province, Town, and District

    Approx. Land Area: (pick square meters or square feet)

    Approx. Construction Area M2: (pick square meters or square feet)

    Property Value:


    Property Description: Please include the age and condition of the property

    What is/are your Land Survey (plano catastrado) or Lot number(s)? (optional)



    Frequently Asked Questions

    How much can I borrow for a mortgage on undeveloped land in Costa Rica?

    The amount you can borrow for a mortgage on undeveloped land depends on various factors, such as the property’s appraised value, income and credit score, and the loan-to-value ratio. Generally, you can expect to borrow up to 45% of the property’s appraised value.

    What interest rates can I expect for a mortgage on undeveloped land?

    Interest rates for mortgages on undeveloped land vary depending on the lender, the loan term, and other factors. Generally, you can expect higher interest rates for these loans than developed properties due to the higher risk involved.

    Can I get a mortgage on undeveloped land for a vacation property?

    Yes, you can get a mortgage on undeveloped land for a vacation property if it meets the requirements for mortgage approval, such as the environmental and legal reviews.

    Can I use my existing home equity to purchase undeveloped land in Costa Rica?

    Yes, you can use your existing home equity to purchase undeveloped land in Costa Rica by taking out a home equity loan or refinancing your existing mortgage. However, this option may have additional costs involved or higher interest.

    What happens if I default on my mortgage for undeveloped land?

    If you default on your mortgage for undeveloped land, the lender may initiate foreclosure proceedings and take possession of the property. Having a clear repayment plan and understanding the potential consequences of default is important.

    Can I finance the development of my undeveloped land with a mortgage?

    Yes, you can finance the development of your undeveloped land with a mortgage, as long as the lender approves the proposed development plans and it meets the environmental and legal requirements.

    Are there any tax implications for getting a mortgage on undeveloped land?

    Yes, there may be tax implications for getting a mortgage on undeveloped land in Costa Rica, such as property taxes and capital gains taxes upon selling the property. It’s important to consult a tax professional to understand the specific tax laws and requirements.

    Can I get a mortgage on undeveloped land if I own other properties there?

    Yes, you can get a mortgage on undeveloped and, even if you already own other properties in the country, as long as you meet the lender’s requirements and the property meets the environmental and legal requirements.



    Contact us for more information, or fill out a loan request now!




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