Making history on the local real estate front, Lehman Brothers Bank has agreed to finance mortgages for foreigners hoping to call Costa Rica their new home.
Lehman is the first foreign bank to provide home financing to non-residents. The Delaware-based institution struck a deal with Stewart Title, which has an office in San José, to facilitate the process on local soil.
“As we look to expand our mortgage lending opportunities outside of the United States, they (Stewart Title) were a natural fit,” said Eric Hibbert, managing director of Lehman’s resort home lending group, based in New York.
However, the bank does not mean for the deal to be exclusive.
“We intend to use all the title companies that are operating in Costa Rica,” Hibbert explained.
Up until three years ago, non-residents were not allowed to take out home mortgages at Costa Rican banks. That did not deter home sales. Instead, potential property owners would come with ready cash or take out a second mortgage in their respective countries.
Local banks have since loosened their lending restrictions, opening up the mortgage market to foreigners.
Stewart Title alone works with seven local banks – ranging from private institutions such as HSBC and Scotiabank to the state-controlled Banco Nacional and Banco de Costa Rica – to help non-residents obtain mortgages.
Lehman has strong name recognition internationally, something that gives a sense of confidence and security to future borrowers, explained Oscar Salas, a commercial manager at Stewart Title.
“In some cases, [clients] do not know the local banks,” he said. “Competition will be better for the local customer.”
Lehman will begin fielding mortgage inquiries as of July 1, the same date as the bank opens a similar agreement in Mexico.
The two Latin American countries are just part of the bank’s global expansion plan, which, at least for now,will remain hush-hush.
“At this point, we don’t want to talk about expansion,”Hibbert said.
In general, future clients can pick from six different amortization periods, ranging from one- to 30-year, fixed-rate mortgages with 20 percent down on the home purchase price.
The mortgages will be secured with the property through a lien filed with the National Registry of property.
Prime creditors need only apply, as Lehman is looking for those with credit scores of 700 or higher.
Lehman will deal solely with U.S. citizens first, planning to expand its operations with time.
“When you look at the demographics of the baby boomer population, we believe that there will be a lot of baby boomers looking for vacation (and living) opportunities outside of the United States,” Hibbert said, while on a business trip to Mexico. “Costa Rica has built a very nice brand, and people are heading there.”
The official launch of the new Stewart/ Lehman endeavor is scheduled for June 20 at the Hotel Playa Conchal.