If you’re dreaming of spending more time in paradise and are thinking about buying a home in Mexico, it’s important to understand how the local real estate market works to get an idea of how far your money will go. Although the exact cost will vary widely depending on the location and the type of property you are looking for, the price of home ownership in Mexico is very reasonable, especially when compared to other top beach vacation destinations worldwide!
Cost of Owning Real Estate in Mexico
The ongoing fees associated with property ownership in Mexico are generally very affordable, including low property taxes and inexpensive maintenance costs; a reality that is particularly attractive for retirees (…or anyone else living on a fixed budget). Calculating the Total Cost of Ownership (TCO) is one way to determine the costs that make up all major expenses associated with owning residential property in Mexico.
First, it’s important to think about more than just the cost of purchasing and maintaining the home. For example, if you don’t already live in Mexico, you will need to schedule a discovery visit to view potential properties, because it’s always a good idea to visit the location and all prospective homes in-person. To help facilitate this, you should also establish a relationship with an experienced realtor who really understands the local real estate market and can help you find the new home of your dreams in Mexico!
As a rule, closing costs in Mexico range between 5-10 percent of the property’s sales value. When a buyer makes an offer on a home that is accepted, a contract is then drawn up to begin the sales process and closing costs will be documented therein. In Mexico, closing costs typically include Notary Public fees and sales tax, along with any other charges that may be required to secure the legal transfer of property.
After you take possession of your new home in Mexico, there are a few other costs that should be taken into consideration, including:
Known as the Predial in Mexico, property taxes are payable by homeowners annually at your local Municipality. Some regions will send a bill, while others run local ad campaigns reminding property owners to pay, and while rates will vary depending on the state, area and size of your home, your property tax bill in Mexico will likely equate to a few hundred dollars ($ US) each year or less.
Property Service and Management Fees
Regardless of whether you buy a standalone house or condo, your new home in Mexico will require ongoing exterior maintenance, including repairs and landscaping, as well as upkeep of any amenities the neighborhood may offer, such as a pool, tennis court, golf course, etc. Co-operative ownership of these spaces is a great way to enjoy access, because maintenance costs are much less when shared by all community members. And if you don’t live in Mexico year-round, you may want to hire a property manager to help care for your home whenever you are away, and if you are interested in saving money, the cost of property management can even be offset by turning your home into a vacation rental!
Drinking Water & Utilities
Although high quality hotels, resorts and some condos in Mexico have built-in water purification systems, when you take possession of your new home in Mexico the water supply may or may not be safe to drink straight from the tap. As a result, there may be costs associated with maintaining your new home’s water purification system, and you may also choose to supplement this with bottled water. Either way, depending on where you live in Mexico, you may need to include a supply of drinking water in your ongoing budget. In addition, to keep your utility bills low in Mexico, the consumption of energy in your home must remain within a subsidized allowance that varies by state and region. If you exceed the allowance, your overall costs will increase, so be sure to budget for this, especially during the hotter months of the year.
Home Insurance Premiums
Whether your home is on or near the coast, located in the mountains, or situated in one of Mexico’s other fabulous expat destinations, you will need to protect your investment from storms, earthquakes, fire and other disasters, so be sure to purchase an adequate homeowner’s insurance policy. Fortunately, today there are insurance companies in both the United States and Mexico who offer coverage – just be sure you fully understand the language and terms of any policy you purchase.
In closing, since there is quite a bit of variation in the cost of real estate in different parts of Mexico, where you decide to buy will play almost as much of a role in the overall cost as the type of property you are looking for. So be sure you get to know the areas you’re most interested in, and don’t ever be afraid to ask questions. With just a little bit of persistence you will find the perfect home in Mexico, where you can make memories that will last a lifetime!
Do you have other questions about buying a home in Mexico? Ask us in the comments!