Can foreigners get financing on a property in the Dominican Republic?
Are you an investor interested in investing in a foreign country? Even if you don’t need finance for your first property, it’s important to know if foreigners are able to get finance in the country where you are planning to buy real estate. Why? Because if you want to create leverage, you will probably need finance in the future and when you want to sell, your exit strategy is much higher if easy finance is available for foreigners.
The Dominican Republic real estate market can be very interesting for foreigners, prices to buy are relative very low compared to Europe, Canada, and the USA. A one-bedroom ocean view property for example, can be bought for around the US$125.000 depending on the location of course. Compare to your home country the ROI is high (around the 10%). The reason that the ROI is high, is that the cost of labor in the Dominican Republic is low and mortgage interest high, those facts make a perfect market to invest for foreigners with a long-term vision. Sooner or later property prices will go up and not because the interests go down and demand will be higher, it will go up because labor prices are going up. Now it’s the time to buy your slice of paradise
1.Can foreigners get financing on a property in the Dominican Republic?
Yes, it is possible for foreigners to get financing in the Dominican Republic.
- What are the requirements to finance in the Dominican Republic?
There is a required documentation that is needed to begin the process of requesting financing in the DR. We listed some of the necessary documentation. Consider that this may vary depending on the bank where you’re requesting the financing or some other institution.
- Copy of passport (Minimum 6 months of validity).
- Identification document of the country of origin. If married, you will also need your spouse documentation.
- Information on immigration status issued by the competent authority in the country (it can be passport entry stamps).
- Application form and due diligence Mortgage loan, completed and signed by the debtor
Evidence of Income Customers residing abroad:
- Income Tax Declaration or Last Year’s Tax Declaration
- Credit score 700 or above
- TransUnion Credit Bureau Report (30 days validity).
If you reside in the US or Puerto Rico, or have American nationality (even as a 2nd nationality):
- Form-Authorization consultation International Bureau for debtor and Debtor and / or / Surety, signed by the parties.
- 2 International Bureau Report (2 months validity).
- What are the steps to acquiring financing in the Dominican Republic?
The steps depend on which kind of property you want to finance.
It is important to note that if the property of your interest is currently under construction, the bank will not be involved until it is completed. This is not the case for resale properties.
Financing a resale property in the Dominican Republic
Financing a resale property can be very basic and simple with our preferred mortgage supplier www.hipoteca.do. They can assist you and will guide you through the process.
First, the bank clears the property and the customer, then there is a contract and an agreement with the price the bank concluded after an appraisal of the property. After that, the buyer goes to the bank and signs for financing.
For resale properties, the bank finances 80% to 85% (of the assessed amount) of the total purchase price. For properties that aren’t in the touristic area or do not meet certain criteria, most banks will finance up to 70% of the sales price.
Here is a list of all the steps when financing a resale property:
- Due diligence of property and buyer by the financial entity, this means you’re going to need work letters, financial and income statements, and more…- we list everything below.
- Appraisal of the property made by the bank.
- After all due diligence is completed, a tripartite agreement between the bank, buyer and seller is drafted and signed.
- After the signature of the agreement, the bank takes care of everything that is needed to formalize the agreement: contracts, transfers, etc. This is why it is not necessary to hire a lawyer if you’re financing a resale property, the bank takes care of the transfer of the property to your name.
Financing an under-construction property in the Dominican Republic
If you’re financing a property under construction, it’s the same procedure but with a longer time period because the Bank doesn’t get involved until the property and the development is finished. The buyer makes payments to the developer or the construction company during the construction. Depending on the arrangement with the developers or the real estate agency, if it is a touristic development, buyers usually complete a total of 50% or 60% during the construction and the balance is financed through one of the banks mentioned below.
It’s the same procedure the only real difference is that you must wait until the property is finished to finance the rest of the amount. Throughout this time, we still get things done and easier for you, so we seize time, and we present the whole process to the bank, we open bank accounts, and attend every detail so we can make sure everything is well done and organized when the property is completed and ready to be delivered.
- Which banks should I work with?
Financing a property by a bank could be an option to buy a property in the Dominican Republic. About six years ago, banks were not willing to financing foreigners but that has changed and now they are open to the market and its demands. Some banks will need that, as a foreigner, you submit your residency but lately that’s not the case. Banks like the Scotiabank or La Nacional don’t ask for residency, others are stricter in these processes
Other banks offer mortgages to foreigners, but it takes some time and effort to do it. Financing in general is possible only for clients from the USA and Canada. For European countries it’s far more difficult. Also, it’s good to note that the major banks here in the Dominican Republic have offices and/or connections in the USA and Canada, so it is easy to get client’s information.
Financing a lower amount is also possible. Banks can discuss the needs and can adapt to your current situation, but the process is slow, so don’t get surprised If the process isn’t completed faster than you’d like.
Are you interested in buying a property in the Dominican Republic and are you looking for finance? Feel free to contact me.
Real Estate and financial advisor.
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