Costa Rica has been touted as "a model economy for developing nations".  But Costa Rica is not an island and it most certainly is not insulated from the current world-wide economic downturn.  Just this week a consortium of Costa Rica economists have declared the country's economy to be in recession - this despite foreign owned companies continuing to establish or expand operations here in Costa Rica.

Costa Rica President Oscar Arias and his administration have taken several steps to stimulate the economy, including the release of $50 million each to state-owned Banco de Costa Rica (BCR) and Banco Nacional (BN) to promote lending.

Costa Rica's Banco Nacional is taking at least some of the money directly to the people in a concept that is relatively new to Central America:  Debt Consolidation Mortgages.

As the former owner of an Illinois mortgage brokerage my firm assisted many, many families in reducing their monthly debt payments by refinancing higher rate mortgages, credit cards and consumer loans into new fixed, lower rate, tax deductible mortgage loan programs.

Now Banco Nacional is offering these same types of mortgage debt consolidation refinancings to home owners in Costa Rica.  However, unlike the higher risk loans that are appropriately being blamed for the current U.S. mortgage and housing crisis ... Banco Nacional is going conservative on the new mortgage loan programs advertised as: BN-Hipoteca Cuota Única which translates to 'mortgage unique' or 'mortgage only ration'.

Some notable term restrictions include:

• Property Type:  Owner Occupied, Primary Residences only
• Maximum Loan Amount:  100.000.000,00 colones (about $179,500.00 USD)
• Maximum Loan-to-Value:  50% of the home's original cost of construction
• Amortization:  20 years (240 monthly payments)
• Rate of Interest: Adjustable Rate Mortgage (ARM) = Banco Central de Costa Rica "tasa básica pasiva" rate (currently 12%) + a margin of 4.75%
• Borrower Qualifications:  Minimum of 2 Years Steady Employment, Provable Income, Excellent Payment History on Existing Credit and a demonstrated Ability to Make the New Payment amount.

Conservative "terms" to say the least ... but this is not what I personally found most interesting.

As a U.S. mortgage professional I spent a career offering 30 year fixed rate mortgages between 5.25% and 9.99% depending on the market, the program and the credit worthiness of the borrower. 

The Costa Rica mortgage rates and resulting payments left me slack-jawed as they probably will most borrowers used to U.S. real estate loan programs.

On the upside, Costa Rica property taxes are exceptionally low compared with most U.S. states ... helping to offset some of the difference in monthly payments for a similar loan in the U.S. 

When comparing the Costa Rica vs. U.S. loan programs as demonstrated in the above and below tables;  a U.S. home owner would need property taxes of approximately $18,000 annually to make up for the differences in rate and term.

While the above Banco Nacional loan program will benefit certain Costa Rica home owners, the numbers are also a reminder of why many foreigners buying property or homes in Costa Rica do so as "cash buyers" - either with real cash or money borrowed elsewhere.

¡Pura Hipotecas de Bienes Raíces!