You found your dream home in Mexico, and you are ready to put in an offer. But, your lawyer just gave you the breakdown of the estimated closing costs, and you are feeling a bit shocked! Why are the closing costs much higher than you are used to back home?
Before buying real estate in Mexico, make sure you are considering the closing costs into your budget. Real estate closing costs in Mexico consist of various fees and expenses. They generally total between 5% to 9% of the purchase price. These costs are always the responsibility of the buyer. The seller, on the other hand, will have to pay other real estate fees and their capital gains taxes.
You should expect to pay the following fees when closing on a property in Mexico:
Notary Fees
In Mexico, any legal acquisition of property must be administered through a Notary. A Notary (Notario Publico in Spanish) in Mexico is an experienced lawyer, selected and appointed by the Mexican Government.
All real estate purchases must be registered with a Notary, and they are legally responsible to ensure the property’s title is clear and properly recorded with the public registry. The fees paid to the Notary are based on the purchase price of the property.
Bank Trust Fees (Fideicomiso in Spanish)
Bank Trust fees can vary by a financial institution and depend on whether you are doing a transfer of trust or opening a new trust. The fees quoted will also include the first year’s trust payment.
Legal Fees
Legal fees paid to the real estate attorney will include the closing services provided.
Taxes & Duties
The taxes and duties paid at the time of closing include:
- Registration of the title deed at the public registry
- Transfer Tax
- Government Closing Documents & Appraisal – these are required by law and based on the purchase price of the property.
Good News – Property Tax is Low
While this may seem like a lot to pay, you will be pleasantly surprised when it is time to pay your annual property tax, known as the predial.
Annual property taxes are very low in Mexico as the tax is calculated at a fraction of what your property is actually worth. Additionally, many municipalities offer significant discounts (up to 25%) if you pay early. Annual property taxes are due in January so discounts will be offered starting in December.
