The Ultimate Guide to Obtaining Financing for Pre-Construction Property

What are pre-sale credits?

 

Pre-sale loans are a form of financing that allows buyers to purchase a property before it is built or completed. These loan terms can typically range from 10, 15, and 20 years, providing flexibility to suit each buyer’s individual financial needs.

 

With this type of financing, buyers can obtain up to 90% of the property’s value, allowing them to access greater purchasing power and take advantage of investment opportunities in the real estate market. This financing can be provided by financial institutions such as banks or credit institutions and is generally subject to certain requirements and conditions established by the lender.

 

In short, pre-sale loans represent an attractive option for those who want to secure their future property early, obtaining the lowest prices, with flexible terms and a high percentage of available financing. However, they also carry certain risks, such as possible construction delays or changes in market conditions.

 

 

Benefits of purchasing a pre-sale property

 

Considering these benefits when purchasing a pre-sale property can be an excellent option to secure your future property and make a smart investment in the real estate market.

 

• Lower costs: By purchasing pre-sale, you can access prices lower than market value once construction is complete, allowing you to save significantly on the purchase of your new home.
• Greater future capital gains: Investing in a pre-sale property tends to generate greater capital gains over time. By purchasing your property before it’s built, you have the opportunity to benefit from an increase in its value as development progresses and construction is completed.
• Brand new: One of the biggest advantages of pre-purchasing is the ability to start from scratch. Enjoy a completely new home, designed according to your tastes and needs, without worrying about remodeling or repairs.
• More Affordable Payment Plans and Down Payments: Developers often offer flexible payment plans and a more affordable down payment for pre-sale buyers. This makes the purchasing process easier and allows you to spread the cost of the property more conveniently over time.

 

 

Risks and considerations

 

Before purchasing a pre-sale property, it is important to consider the following key risks and considerations:

 

• Potential Construction Delays: One of the main risks when purchasing a pre-sale is the possibility of construction delays. Factors such as weather conditions, financing issues, or permitting can cause delays in project delivery, affecting your move-in plans.
• Changes to specifications: As the project progresses, the developer may make changes to the original specifications for the design, materials, or layout of the property.
• Financial Risks: While pre-sale payment plans are often more flexible, you should carefully consider your financial capacity to meet the scheduled payments. A change in your financial situation could affect your ability to complete the payment for the property.
• Developer Default: There is a risk that the developer will default on its contractual obligations, either due to financial difficulties or unethical business practices.
• Warranties and Legal Protections: Make sure you understand the warranties and legal protections available in case of non-compliance by the developer or any other problem during the purchasing process.

 

 

Acquisition process

 

The process of acquiring a pre-sale loan involves several crucial steps; here are the most general ones:

 

• Submit the Credit Application: Start by completing the credit application with the bank or financial institution of your choice.
• Documentation Reception and Review: Once the application is submitted, the required documentation, such as proof of income, official identification, and financial statements, is received and reviewed.
• Income Review and Bank Approval: The bank will review your income to determine your ability to repay and evaluate the credit eligibility. Once approved, the next step begins.
• Appraisal and Title Execution: A property appraisal is performed to determine its market value, and the title is executed, establishing the terms and conditions of the loan.
• Credit Signing: Finally, the credit contract is signed, formalizing the agreement between the buyer and the bank, and the funds for the acquisition of the property are delivered.

 

This process guarantees a secure and transparent transaction, giving you the confidence to take the step toward pre-purchasing your new home.

 

 

Requirements

 

To apply for a pre-sale loan, the general requirements are usually as follows:

 

• Age: Between 18 and 65 years old.
• Verifiable income: Provide verifiable income through bank statements, pay stubs, or other banking instruments.
• Payment capacity: Payment capacity must be at least 3.5 times the amount of the requested loan.
• Work experience: Have a minimum of 3 years’ experience
• Joint income: You can combine your income with that of your partner, siblings, associates, or friends, as long as everyone submits an application.
• Official Identification: Present a valid official identification.
• Credit Bureau: Have an up-to-date and favorable credit history.
• Credit Application: Complete and submit the corresponding credit application.
• Proof of address: Provide recent proof of address.
• Additional documents for Infonavit Support: Irrevocable instruction letter and authorization letter for the procedure.

 

 

 

 

Hir Casas

 

Requirements for contracting Pre-Sale Credit

 

• Age: 18 to 65 years
• Income verifiable with different bank instruments or receipts.
• Account statements or pay stubs
• The payment capacity must be 3.5 times.
• Income can be combined with that of a partner, siblings, associates, or friends.
• Everyone must submit their registration application
• Official identification
• Updated credit bureau (regardless of your income verification method)

 

 

Benefits and features of Hir Casas mortgage loans

 

• The lowest down payments on the market
• Flexibility in Income Verification and Credit Bureau
• We finance other types of properties
• Includes Life, Unemployment and Damage Insurance
• Financing for your real estate or development property
• Professional treatment and agility in the writing process
• Personalized advice and support
• A lasting relationship
• Seriousness and confidence

 

 

Application and approval process

 

• Calculate your financing
• Registration
• Periodic Installments
• Award
• Writing

 

 

 

 

Scotiabank

 

 

Scotiabank Mortgage Loans: Available Options

 

 

 

Requirements for contracting Pre-Sale Credit

 

• Age from 25 years.
• Minimum verifiable income (Infonavit support $7,500 MXN, without Infonavit support $10,000 MXN)
• 2 years minimum seniority in current and previous employment
• Credit application
• Official identification
• Proof of income
• Proof of address
• Irrevocable letter of instruction and letter of authorization for the procedure (only applies to Infonavit Support)
• Work program and budget

 

 

Benefits and features of Scotiabank mortgage loans

 

• Lower property cost: Buying pre-sale generally allows you to purchase the property at a lower price compared to its final value, which can result in higher capital gains.
• Opportunity for customization: When you purchase a property from the developer through pre-sale, you have the opportunity to make adjustments and personalize certain aspects of the home according to your tastes and needs.
• Interest deductibility: The actual interest on a mortgage loan is tax deductible, which can represent significant tax savings.
• Apply your Infonavit support: You can use your Infonavit support to finance the purchase of a property, combining your employee benefits with bank financing to maximize your purchasing power.
• To qualify for the loan, a progress check must be completed for the house or apartment to be financed.
• To grant subsequent ministrations, additional verifications of work progress will be necessary.

 

 

Pre-sale loans: Which to choose: Hir Casas or Scotiabank

 

 

Direct Financing

 

Direct financing is a financing method in which developers or suppliers of goods and services offer credit directly to buyers without the intermediation of traditional financial institutions such as banks. This type of financing is commonly used in the construction industry, especially for projects in the pre-sale stage.

 

 

How does Direct Financing work?

 

The direct financing process involves several stages and is characterized by a direct relationship between the developer and the buyer. The typical operation of this system is detailed below:

 

1. Developer Offer: Real estate developers offer direct financing to buyers of properties under construction. This financing can cover everything from project inception to completion and delivery.
2. Loan Terms: The terms of the loan, including the term and interest rate, are set by the developer. In many cases, terms range from 1 to 10 years, with interest rates as low as 7% per year.
3. Financing Agreement: The buyer and developer sign a financing agreement that sets out the loan terms, payment terms, and required collateral.
4. Payments and Disbursements: Payments are made directly to the developer according to the agreed-upon schedule. Disbursements typically coincide with construction milestones, providing a steady cash flow for the developer.

 

 

Advantages of Direct Financing

 

Direct financing offers several advantages for both buyers and developers. Here are some of the most significant:

 

• Accessibility: This type of financing is often more accessible than traditional bank loans, as approval requirements may be less stringent. This makes financing easier for a wider range of buyers.
• Flexibility: Direct financing terms can be more flexible, allowing for customized agreements that better fit the buyer’s needs.
• Competitive Rates: Interest rates offered by developers can be competitive, in some cases starting at 7% per year, making them an attractive alternative to bank rates.
• Simplified Processes: By eliminating bank intermediation, the credit approval and disbursement process can be faster and less bureaucratic.
• Mutual Benefit: Developers secure early sales and steady cash flow, while buyers gain financing to purchase properties under construction, often at lower pre-sale prices.

 

 

Financing 30/70

 

30/70 financing is a payment scheme in which the buyer makes a 30% down payment on the property’s value and the remaining 70% is paid upon delivery. This method is common in real estate projects in the pre-sale or pre-construction stages, allowing buyers to secure a property with a relatively low initial investment.

 

 

How 30/70 Financing Works

 

The operation of 30/70 financing involves several stages and options for the buyer:

 

• Down Payment (30%): At the time of purchase, the buyer pays 30% of the total value of the property as a down payment. This initial payment secures the property and can come from the buyer’s own resources.
• Preconstruction: During the preconstruction period, the buyer makes no additional payments. This phase can last between 12 and 18 months, depending on the project.
• Payment of the Remaining Deposit (70%): Once construction is complete and the property is ready for delivery, the buyer must pay the remaining 70% of the property’s value. This payment can be made through various options:
  • – Bank or Mortgage Loan: The buyer can choose to finance the remaining 70% through a bank or mortgage loan. However, it’s important to note that loan approval is not guaranteed.
  • Own Resources: Alternatively, the buyer may use his own resources to pay the remaining 70% upon delivery.
• Resell the Property: If the bank loan is not approved, the buyer has the option to resell the property, taking advantage of the appreciation period during construction.

 

 

Advantages of 30/70 Financing

 

This financing method offers several advantages that make it attractive to both developers and buyers:

 

• Low Initial Investment: Only a 30% down payment is required, allowing buyers to secure a property with a relatively low initial investment.
• Payment Flexibility: Buyers have between 12 and 18 months to prepare the remaining 70% payment, either through a bank loan, mortgage, or using their own resources.
• No Payments During Preconstruction: During the preconstruction phase, buyers make no additional payments, providing temporary financial relief and allowing for better financial planning.
• Possibility of Resell: If bank credit is not approved, buyers can choose to resell the property, which can be an effective strategy to avoid losses and take advantage of the property’s appreciation during construction.
• Attractive for Developers: Developers can secure pre-sales and obtain initial cash flow with a 30% down payment, facilitating project financing and continuity.

 

 

Financing or Payment Methods 30% – 40% – 30%

 

30%-40%-30% financing or payment methods are a commonly used structure in construction and real estate projects, especially by real estate developers. This method involves dividing the total cost of a property into three main payments: an initial 30% down payment, followed by 40% during the construction period, and the remaining 30% upon completion.

 

 

How does 30% – 40% – 30% financing work?

 

1. 30% Down Payment: At the start of the project, the buyer makes an initial payment equal to 30% of the total property cost. This down payment can be considered a commitment from the buyer and is often required to secure the project.
2. 40% during construction: As construction progresses, the buyer makes additional payments to cover the remaining 40% of the total cost. These payments are typically scheduled at specific stages of the project, reaching the full 40% upon completion of the main construction phase.
3. Remaining 30% at the end of construction: Once construction is complete and the relevant authorizations are obtained, the buyer makes the final payment equivalent to the remaining 30% of the total cost. This payment finalizes the acquisition process and allows the buyer to take full possession of the property.

 

 

Advantages

 

• Financial Flexibility: This payment structure offers flexibility for both the buyer and the developer. The 30% down payment gives the buyer additional time to arrange the necessary financing, while staggered payments during construction help spread the cost more manageably.
• Risk Mitigation: By dividing the payment into multiple stages, both the buyer and the developer share the financial risk more equitably. This can reduce exposure to potential financial problems or project delays.
• Incentives for buyers: For buyers, this payment method can be attractive due to the lower initial financial burden compared to other financing methods. Additionally, by paying a significant portion during construction, buyers can feel more secure in seeing the project’s progress before making full payments.

 

 

Frequently Asked Questions about Pre-Sale Credits

 

 

What happens if the project is delayed?

 

If the project is delayed, pre-sale contracts often include specific clauses for these situations. These clauses define the procedures to be followed and the rights of buyers in the event of a delay. Additionally, as a buyer, you can seek compensation for damages caused by the delay. It is crucial to read and understand these clauses before signing the contract to understand your rights and the actions you can take in the event of a delay in the construction of the property.

 

 

Can a pre-sale loan be cancelled?

 

Yes, it is possible to cancel a pre-sale loan, as long as you have covered 100% of the down payment. Once this is done, a period will be established for your refund, according to the terms and conditions agreed upon in the pre-sale contract. It is important to carefully review the cancellation clauses before signing to fully understand the process and any potential penalties or additional costs.

 

 

What additional costs should be considered?

• Appraisal cost
• Notary and deed fees
• Down payment (can be 10% to 20% of the total value of the property)
• Credit approval

 

 

What are the financial benefits of pre-purchasing a property?

 

One of the main financial benefits of purchasing a pre-sale property is the significant savings you can achieve. By purchasing at this stage, the lowest-priced phase, you can save up to 30% of the property’s value compared to its price once construction is complete. This discount is due to the fact that developers often offer lower prices to attract early buyers and secure project financing.

 

 

Conclusion

 

Pre-sale loans represent an excellent opportunity to acquire properties at lower prices and with potential for appreciation. As you can see, Hir Casas and Scotiabank offer comprehensive solutions that facilitate this process, providing security and confidence, and helping you save time and hassle. For more information, you can contact us directly for specialized advice and to begin paving the way for your dream property.

 

We’d love to hear your feedback. If you have any comments, concerns, or questions, please feel free to share them in the comments section below. We’re here to help and guide you.
If you found this article helpful, please feel free to share it on your favorite social media platforms or send it to your family and friends via email or WhatsApp! Thank you so much for your support, and remember, we are Plalla Real Estate.