If you’re planning on retiring or living in Mexico, no doubt you’ve heard some confusing stories about buying property here. And while there are some differences in the process “south of the border,” one thing you can be sure about is the security of acquiring real estate through a fideicomiso, or otherwise a bank trust.
Here’s how it works: If you purchase property in Mexico within 62 miles of the border or 31 miles of the coast and you aren’t a Mexican citizen, you must use an indirect form of ownership - a fideicomiso, where a bank acts as an administrator of the trust in which the title is held. You are the beneficiary of the trust, and you are THE ONLY LEGAL OWNER of the property held in trust.
At first glance, many people assume that a fideicomiso is a lease - but it’s not even close. A lease gives the lessee or tenant the right of possession, but it lacks the bundle of rights that resemble ‘fee simple’ in the US and Canada.
As beneficiary of fideicomiso, you have the legal right to sell, mortgage, lease, build and leave the property to your heirs without probate as a substitute beneficiary. The bank is only the administrator and has no rights to your property than collecting the yearly dues. And you can relax: Your trust (property) is not considered assets of the bank, so if you consider a worst case scenario of the bank going bankrupt, the trust is automatically passed on to another banking institution that assumes the administrator duties. Keep in mind that this process is regulated by the Mexican government. (Nobody trusts banks anymore, right?)
There’s an initial cost to set up the fideicomiso of approximately $2,500 US and an annual fee thereafter of approximately $400 US. If you like, you can set up an automatic charge on a credit card towards the annual fees, but if you prefer to make the payments manually and forget to do it one or more years in a row, don’t worry, you won’t lose your property but will probably receive a penalty.
The fideicomiso is good for a 50-year period that’s automatically renewable. It is also assumable unless you’re getting bank financing, in which case most lenders require a new bank trust with their name included.
So, is a fideicomiso a reliable document? With more than 100,000 bank trusts already in existence in Mexico and the fact that international mortgage bankers are financing these purchases, you can be assured this is indeed a trustworthy, dependable way to purchase Mexican property. Go for it!