Buying Property in Costa Rica – Here’s Why Financing Might Look a Bit Different from what you’re used to

Buying a home in Costa Rica is an adventure, and so is figuring out how to pay for it! Unlike in the U.S. and Canada, where most buyers put down a small percentage and finance the rest, Costa Rica’s property market is all about cash. You’ll find that “cash is king” here, and while financing is possible, it’s structured differently, with unique quirks and options that every buyer should know. Let’s explore why financing in Costa Rica is a bit of a twist—and how you can use some clever methods, like Airbnb income, to make it work!

1. Costa Rican Bank Mortgages: Not the Easy Route for Foreigners

In Costa Rica, you’ll quickly discover that securing a mortgage from a Costa Rican bank isn’t as simple as it is back home. For one, banks in Costa Rica require a hefty down payment—often between 30-50%. And if you’re a non-resident, you won’t be eligible for a local mortgage at all. Even for residents, Costa Rican mortgages can take a bit of patience, with requirements like verified income, high down payments, and a whole lot of paperwork (in Spanish!)​

Interest rates range from 8-10%, so while this may sound reasonable compared to private financing, the upfront work is substantial, and every mortgage comes with a lien on the property, protecting the bank’s investment.

2. Private Lenders: Quick but Costly

Private lenders can swoop in as a more flexible option, especially for foreigners. If you need quick funds and want to sidestep the red tape, private financing may be appealing. But be prepared for interest rates of 15-18%, which is significantly higher than bank loans​

The high rate means your monthly payments can add up fast, so private loans work best if you’re sure of a speedy payback plan—perhaps by generating rental income through platforms like Airbnb! Just remember that private loans also come with a lien, which secures the lender’s claim on your property if payments aren’t met.

3. Owner Financing: Flexible but Short-Term

Owner financing is an appealing option in Costa Rica’s market. In this arrangement, the seller acts as the lender, often with terms like 2-9% interest over a much shorter loan period, typically 1-3 years. With down payments of 50% or more, owners can be more flexible about documentation, and you avoid dealing with banks altogether​

Here’s a unique perk for potential investors: if you plan to use your property as an Airbnb, your rental income could help cover those monthly payments. Many property buyers take this route, leveraging short-term rental income to meet their obligations to the seller. After a few years of paying down owner financing, you can look at refinancing options or pay off the remaining balance if you’ve done well with rental revenue.

Special Tip: Taking Over an Existing Mortgage

Here’s something not everyone knows! If the property you’re buying already has an existing mortgage, it’s possible to take it over—even if the mortgage is still in the original owner’s name. Why? Because in Costa Rica, the lien is on the property itself, not just the borrower. So if payments aren’t made, the bank would take the property back rather than going after the previous owner personally​.

This setup can be beneficial if you’re looking to take over an existing mortgage with better terms. But remember, you’ll still need to verify all the legalities with a local attorney or real estate agent who understands Costa Rican property law. Taking over someone else’s mortgage might sound complex, but it can be a good solution for those seeking a more affordable path to ownership.

The Bottom Line: Financing in Costa Rica Takes Creativity

Purchasing property in Costa Rica is a fantastic investment, especially if you’re savvy with financing options. In short, if you’re set on traditional financing, Costa Rica will make you rethink the process. Cash really is the name of the game here, but with options like owner financing, private loans, and even Airbnb income to cover payments, buying a home in Costa Rica is entirely possible for buyers willing to explore creative paths.

Tips to Make Your Financing Journey Smoother

• Work with a local expert: From real estate agents to attorneys, a local team can help you navigate the specifics.
• Consider rental income: Properties in high-demand areas can make great short-term rentals to cover your financing costs.
• Think short-term: Most Costa Rican financing is structured over shorter terms than in North America, so plan for potential balloon payments or refinancing options within a few years.

Whether you’re looking to relax in the rainforest or invest in a beachside rental, financing in Costa Rica requires a bit of ingenuity. Get creative, be informed, and soon enough, you’ll have your own slice of paradise!