When you're looking to take out a mortgage loan on your property, the mortgage lenders…
For whatever reason, you need a home equity loan, a short-term mortgage using your home as collateral. You’re trying to figure out the easiest and quickest way to accomplish this.
One would assume you would google mortgages in Costa Rica. A variety of options would pop up, such as going to the local bank or credit union. The other option you would see is private equity lenders. What are the differences?
In Costa Rica, banks and credit unions take a very long time (up to 6 months) just going through the loan application process. Especially if you’re a foreigner, self-employed, without much of a Costa Rican credit history yet. It can take weeks or months just to hear the words “I’m sorry, you don’t qualify”.
The Inaccessible Bank Analyst
Very often, you won’t get an explanation for why you don’t qualify for a home equity loan. Here is, by the way, the reason you never really get an explanation:
- Every bank has an analyst that goes through mortgage applications.
- This analyst is reviewing many applications at the same time and is requesting more information in areas that he or she needs to feel comfortable with before approving any type of loan.
- This analyst is pretty much kept separate from the day to day activities of the bank, to avoid favoritism from say a bank manager or co-worker.
- There is no way for you to ever contact the analyst directly — even if it is to just find out why you were declined.
With private equity firms such as Gap Equity Loans, our process is much faster and more transparent. First, we do asset-based loans. We do ask about your credit, why you need the loan and how will you pay it back. We will sit down with you and go over these questions with you.
Second, you need to fill out our two-page loan application with 10-15 pictures for us to see the quality of construction as well as the state of the asset. Is the building new, under construction or is it very old? On the application is the land survey (plano catastro) number which tells us where the property is located.
Our Home Equity Loan Analyst
With this information, we can calculate the value with a great deal of certainty. We too have an analyst, except he explains to us in great detail the pros and cons of the property. We check the property registry for any legal problems that may affect our decision whether to move forward or not.
Last but not least, once we have done all our due diligence, double-checking the application, reviewing the status of the property and more, we then move to our final phase, which is a site visit and verification of the location of the property.
During the entire process, we are always communicating with you, the borrower. You will be updated almost daily about the status of the loan. If the answer is no, you will receive a full explanation for why we cannot present this loan to our funders.
Many of our loans do not pass the litmus test usually because the borrower is asking for too much money and has overvalued his property. Remember, in a worst case scenario, the property needs to be sold, it needs to be sold quickly. And in Costa Rica, real estate can take a very long time to sell at retail value.
From start to finish, we can typically complete a transaction in about 7 working days. Working days, because Costa Rica has a lot of holidays. Our interest rates and fees are about the same as a bank if not better. We charge interest only with a balloon payment at the end of the term, and in many cases we will renew the loan if you as the borrower are never “a day late or a dollar short” over the term of the loan! This is how you qualify for a home equity loan.