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Anyone have experience getting a mortgage here in Colombia?

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juanm123
  8/5/2015 11:36 EST

Hi everyone. We are thinking of taking advantage of the high USD to finally buy a house (in Bogota). I´ve been looking for a good mortgage calculator here to better understand how they mortgages are calculated here in Colombia but haven´t found one yet.

Given that mortgage rates are around 10% I´m wondering if they are calculated the same as in the US? Maybe I´m being overly optimistic, but I have a hard time seeing how people could pay the monthly payment if done the same way. I had a mortgage in the US for $350k and that was around $2k/month (at 4.7% for a 30 year). So would that imply the same amount here but most likely on a 15 year mortgage as that is more the norm here would be roughly $5k/month? If so, who can afford that? If that is the case, who

Anyhow, if anyone has experience with this please do reply.

Thanks,

John

soystar1
  8/5/2015 12:13 EST

John or Juan,

I tried getting a mortgage here but it's the same as a credit card. As long as you are a foreigner and do not have a Colombian income the banks have just smiled and said no. They have asked me to put my pension into their bank accounts but I am leery of this. I have no doubt that the mortgage rates are just as any other credit offering here and have a miserable interest rate and sticker shock.
Please let the forum know about your venture.

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bigjailerman
  8/5/2015 12:19 EST

Yes they try to drain your pocket at any opportunity. Not only as a foreigner but the want to slaughter you on credit cards, bank accounts. Soy I agree, they tried to split my pension but if something goes wrong you will have the fight off your life. If rather deposit manually.
I also find mortgage way out of hand. My mother in law here can secure better financing for me but that also isn't my first choice.
For me it's cash purchase or rent lol

rafapark
  8/18/2015 15:01 EST

Yes, getting a mortage in Colombia without any Colombian income will be difficult. (Try to get a mortage in the US under similar conditions and she what the bank's reaction is!! ). Besides, the Colombian bank system is very costly to the consumer. There is very little competition ( I wonder what Bancolombia's market share??!!) They impose the rules. Besides Colombia is developing economy thus the risks are higher, thus interest rates are also higher.

soystar1
  8/18/2015 17:23 EST

this why I posted the wells fargo info. Impossible to none to get a loan here when you are not receiving a Colombian income or pension. I wouldn't get one anyway with the high interest rates, Major rip off.

Some us can pay cash.

Exbury
  8/19/2015 16:42 EST

Mortgages are hard, hence still a fairly strong rental sector as rents are comparatively cheap. I would not purchase housing here unless I was looking long-term. The monthly return on our apartment (we rent) is lower than 0.4% of the value. Offices or locales (in the right location) fetch a higher return generally. However each to their own.

On top of the interest rates add the insurance fee some charge and other items such as credit card fees they slap on. Bear in mind its not like the US or UK, they will add charges on without telling you. Good luck trying to get rid of these after the event, the banks dont care and try to find a body to slap their wrists......

My personal choice would be to take out a loan for the amount overseas and transfer over the money at the higher exchange rate if you want to buy. That way pay off the loan in the country in which you are earning it. As previous posts you will need to declare the money etc.....

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rafapark
  8/20/2015 10:23 EST

My experience on return on rentals in Colombia is bit different. I have an apartment in el Poblado that is rented out and the return is a bit above 4%. The property has greatly appreciated in pesos since I bought it but flat in dollars now with the revaluation of the dollar. This return is after paying the broker fee and property taxes. This is also similar to other people I know who have rentals in Medellin. Similar return to what I get for a property that I have in the US (lower risk in the US thus it is a "safer" investment). However, historically, property in Colombia has appreciated a lot more in local currency than in the US but of course it has its risks, like what we are seeing now with the revaluation of the dollar. You can't control those things. Net, you invest in higher risks assets expecting higher returns, but at the same time the risks are higher. Sometimes you win, sometimes you lose..

Exbury
  8/20/2015 12:53 EST

Rafapark, I assume you mean 4% per year? Thats about what we are paying (under 0.4%/month ~= 4% per year). Saying that if you choose wisely like Rafapark you should be able to get slightly better returns than some areas. Dont get the cheapest property you can, choose something that will be in demand and rent out time and again. The return also depends upon whether you bought the property early and are basing it on this value or the current value. I was basing it at current value.

For me 4% on property is quite low, in the UK my return is around 8% with the ability to offset expenses against the income before I pay tax. I would not expect to receive the same here on a rental apartment, however offices seem to provide a better rate of return. On the first office investment I have had here in Cedritos, I have had to pay taxes and Valorizacion (its rented to a commercial business) equivalent to around 15% of the annual rent. On top of that I lose around 10% to the Agency. However the return is around 1%/month (based on current value) before those expenses so it kind of matches the UK growth (we got lucky a bit with this one). However, taking in to account inflationary factors, the growth in Colombia while higher, has not matched the growth in the UK (for me). The mortgage rates on buy-to-let property over there is still way better than here. However the US is a different story and I am not up to speed over there. Also, the UK market may lose some of the expenses offsetting over the next few years which will change things a fair bit.

I did a fairly exhaustive exercise comparing office property in Bogota to private rentals just outside of London and assumed a fixed investment, a mortgage here compared to the UK and other assumptions over rentability etc. (I took a bit of a pessimistic approach to rental periods etc.). While returning a better rental quicker in Bogota and paying off the mortgage quicker, if you assume inflation (in both countries) and the value of your money/investment for me the UK was still the better bet, especially after around the 5-10year mark. Saying that, I like to diversify a bit hence I have bought an off-plan office in Bogota that should complete in a couple of years, hopefully when the recovery may start picking up. This has a financial advantage for me in that I can fix the price, pay it off over a period of time and I can outfit it the way I want it.

in terms of mortgages, I am reluctant to get one here (even if I could), I am trying to convince my wife to wipe out her mortgage on her apartment as they add on a lot of extras. Personally borrowing money overseas at the lower interest rates seems to be a lot more competative than a mortgage here, even if losing in the exchange rate/transaction fees.

Everyones situation is different but if i was investing over here again I would either go for a desirable apartment or an office, I have looked at some off the 140 that look a reasonable buy, (but choose location carefully), bear in mind once you invest over the threshold you then have to start declaring taxes here. If you are paying in cash you should have some negotiating power, but depends upon the developer/seller. I think properties are somewhat over-priced for the current market conditions, but whether we will see a price crash or just a slowdown remains to be seen.

Just my thoughts.....

LaPiranha
  8/20/2015 13:37 EST

Interesting posts Rafapark and Exbury. Agree with a lot of what you say. When planning my move, I decided to downgrade my own living requirements and buy a cheaper apartment, but new, and one which I liked. This enabled me to buy some shops for cash, (no loans or mortgage) which I rent out, to give me a great income for life.

I found that apartments would give me a return of about 0.5% per month of the capital invested. Shops would return about 1% per month, and offices could give a return of up to 2% per month. However, the location is so important and will affect the rental desirability and also the rental income. Its no good buying a place because its cheap, then finding you cannot rent it out. Then when you give up trying, and want to sell it, you find there are no buyers. So you have to choose very wisely and selectively. I found that office space was so erratic and the desirable areas would change frequently, like fashion, so what would be "in fashion" when you buy it would quickly lose its desirability and another area would take its place. So I stuck to shops.

Another reason I chose shops, also is important. With an apartment or office, there are many things that are at risk of repair bills and high maintenance, certifications, etc, especially with some types of tenants - Ha, that's another story. I have seen some tenants, and boy, they are nothing like the impression they give you when they apply for the tenancy - ha ha. Toilets, water systems, electricity wiring, fixtures and fittings, leaking roofs, etc. And if something goes wrong, you can find yourself with high repair costs. A lot of shops, especially in the smaller local centro comerciales are really no more than 3 walls and a glass front. Nothing too much to worry about. If there is a leaking roof, the CC has to attend to it, not you. Electrics are simple, and are usually for the tenant to adapt to his own requirements

The values have increased with each year, and of course, so does the rent. I'm happy with the decisions I made, and would recommend buying to let out.

rafapark
  8/27/2015 11:01 EST

8% return in property is great! . I invest in property mostly for the appreciation of the capital long term, seeking for the monthly income to cover property expenses and a bit more. As I said, I am getting about 4% after paying all taxes.I need to investigate a bit more commercial property in Medellin. I'd love a 12% return in property. Hell, I'd love a 12% return in any investment nowdays! 12% return on a "safe" investment like property is pretty good! Yes, I am talking monthly.

GenteyCasas
  8/28/2015 12:40 EST

I am planning also to get a house in Colombia because I really want to move there very soon. Looking for a house at least that have a 2 bedrooms like a simple a house. Is the cost living there okay?

www.genteycasas.com

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LaPiranha
  8/28/2015 16:02 EST

GenteyCasas. What a strange question. With 762 properties advertised on your website, I thought you would know all about Colombia, and Bogota in particular, with 516 of them listed there.

And you don't even live here in Colombia? That's very strange. How do you manage to sell your properties?

Are you sure you are not just posting an advert?

thelocogringo
  8/28/2015 19:16 EST

Rafa,

Jim Main from Cartagena First American Realty has two small locals avialable that have a nice ROI. His phone is 313 532-5731

soystar1
  8/28/2015 22:09 EST

Since we now know that mortgages are a mythical fart. We should for all intended purposes focus on how to establish capital to acquire real estate. I think one of the methods as proposed by another writer was to use some type of equity aka using opm (other people's money) to buy real estate. As you probably can start to see by the writing on the arepa that creative financing should have been in place long before you try your hand at Colombian real estate investing. But you know this already.

We are blessed with a strong dollar and with rumors stating that October might be our zenith. One can only smile as the greenback pushes past the 3000 cop level and beyond.

ColombiaGringo
  1/31/2016 17:33 EST

creating a company to pay you a salary works wonders in Colombia. A foreigner with a job from a company shows a person with strong links in Colombia. Personally i am a legal rep for a corporation in Colombia that pays me part time, and just with that the bank said i qualified after 3 months with the job. of course i have been here 10 years. i didnt get the loan because the rates were about 9% per year, and i didnt really want a loan. i was happy just to qualify.

Cheers,

James Lindzey
www.medellinlawyer.com

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