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Real Estate Mortages in Panama

Overview

A mortgage is a loan used to buy real estate. The borrower agrees to pay back the loan over time, typically in monthly payments that include principal and interest. The property that is being purchased serves as collateral for the loan, which means that the lender can take ownership of the property if the borrower defaults on the loan. In Panama, both nationals and foreigners can access mortgages for Real Estate. Mortgage loans are based on the applicant’s ability to pay and not on credit history as is usual in North America.

Panama is a popular destination for foreigners who are looking to buy real estate. The country has a stable economy, a strong legal system, and a relatively low cost of living. In addition, Panama offers a variety of mortgage options for foreigners, making it possible to purchase property even if you don’t have a perfect credit history. However, the mortgage conditions and requirements to obtain a loan depend on each bank, and that is why it is important to compare the terms that each bank offers.

Types of mortgages available

  • Conventional mortgages are offered by private banks. They typically have higher interest rates and stricter requirements than government-backed mortgages.
  • Owner financing is when the seller of the property agrees to finance the purchase. This can be a good option for borrowers who have difficulty qualifying for a mortgage from a bank.

Mortgage terms in Panama

  • Mortgage terms in Panama typically range from 10 to 15 years.
  • Down payments are typically 30% of the sales price.
  • Interest rates in Panama are typically higher than in the United States, but they have been declining in recent years.
  • There are a variety of mortgage lenders in Panama, including both local and international banks.

Requirements for getting a mortgage

Requirements for nationals

Panamanians can usually access terms with a down payment of less than 30%. They are also eligible for preferential interest loans with government subsidies. And, if they are salaried, they are usually offered loan terms longer than 15 years.

The requirements to obtain a mortgage as a Panamanian include:

  • Social Security Card
  • Last Social Security card
  • Pay stub that accompanies your paychecks each month.
  • Proven job stability. (minimum 2 years).
  • Work letter with itemized deductions (original).
  • 3 Last authenticated Income Tax Returns (Self-employed).
  • Paz y Salvo (Independents).
  • Receipts of Payment of the Statements (Independent).
  • Last Payment Stub.
  • Open a Savings Account.
  • Good Credit References.

Requirements for foreigners

Foreigners are normally required to submit a down payment of at least 30%. Most Panamanian banks and lending houses are rigorous in verifying your documents and a stable and verifiable source of income is required. Foreigners do not have access to government programs for loan subsidies, and usually obtain loan terms of a maximum of 15 years.

Requirements for obtaining a mortgage as a foreigner include:

  • Complete passport photocopy
  • Photocopy of additional identification document (e.g. driver’s license).
  • Recent utility bill in the applicant’s name and showing the applicant’s home address.
  • Credit report.
  • CV (resume showing education and work history).
  • Two original letters of bank references.
  • Two letters of commercial or professional references.
  • Bank statements for the last 12 to 24 months.
  • Income Tax Returns for the last 2 years or Audited Financial Statements.
  • Letter explaining the source of income and stating the reason for the purchase of the property.
  • Proof of immigration status (if your stay exceeds the tourist visa period).
  • Appraisal of the property made by an appraiser authorized by the Bank.
  • Receipt of the purchase contract and support of the down payment.

Process of applying for a mortgage in Panama

The process of applying for a mortgage in Panama can be complex, so it is important to work with a qualified mortgage broker.

  • The broker will help you gather the necessary documentation and submit your application to the lender.
  • The lender will then review your application and decide whether to approve your loan. They will also conduct a property appraisal to determine the value of the property you are buying.
  • If your loan is approved, you will be required to sign a mortgage agreement. This is the final step in the process, and it involves signing all the paperwork and transferring funds. Once the loan is closed, you will be the proud owner of your new property.

Costs associated with getting a mortgage

In addition to the mortgage interest, there are other costs associated with getting a mortgage in Panama. These costs can include:

  • Application fees.
  • Appraisal fees.
  • Title insurance fees.
  • Mortgage insurance premiums.

Tax implications of owning a mortgage

Foreigners who own property in Panama are subject to Panamanian taxes on the property. These taxes can include:

  • Property tax: The rate in Panama is 0.5% to 0.7% of the assessed value of the property. The assessed value of the property is typically 50% of the purchase price.
  • Capital gains tax: Capital gains taxes are taxes paid on the profit made when you sell a property.
  • Interest deduction: You may be able to deduct the interest you pay on your mortgage on your Panamanian income taxes.
  • Property transfer taxes: Property transfer taxes are taxes paid when you buy or sell a property. The property transfer tax rate in Panama is 2% of the purchase price.

Contact us

Getting a mortgage in Panama can be a great way to buy property in the country. Whether it is for an investment or to own your own home, our team can guide you through the process of obtaining your mortgage loan. Send us a message to info@kraemerlaw.com to learn more about your situation and get the right advice.