What a New Lender Should Know in the First Year

The first year is the one where habits form, and most of what a new lender learns in it could have been told to them on day one. This is that conversation, from people who watch it happen constantly.

Your first file will take longer to decide than your tenth

Expect that, and do not mistake it for a warning sign. The first time you read a property valuation, a title report and a repayment plan together, none of it is familiar. By the third or fourth file you will know within ten minutes whether something interests you, and the questions you ask will be sharper.

Take the time. Ask the obvious questions — where exactly is this, who would buy it, how much is being borrowed against what it is worth, how does this get repaid — and ask them again on every file after. Those four questions do most of the work.

Start where the good files are

New lenders often assume the higher rate is the better deal, and it is the most expensive assumption in this business. GAP advertises from 9% and up, and the owners with the strongest files can negotiate — good location, clean title, a modest loan against a well-valued property. They take the lower rate because they have that option.

Which means the 9% and 10% end is where the cleanest collateral tends to sit, and lenders who will look there are shown more of it. Being open at 9% is a signal, not a commitment — once a property has been studied, the same file may reach you at 12%. Over a first year most lenders end up with a spread rather than a single number.

Two or three smaller loans beat one large one

If you have $200,000 to place, resist the urge to put it all in one file. Two or three smaller loans mean different properties, different borrowers and different maturity dates — so if one runs late, the others are unaffected, and capital comes back at intervals rather than in a single lump you then have to redeploy all at once.

Loans start at $50,000 with no ceiling above it, which makes spreading straightforward at most sizes.

Pick your term deliberately

Terms run from six months to three years, and the choice is about your life rather than the file. If you might want this money back within the year, take shorter files and say so up front. If you would rather not be redeploying capital every few months, take longer ones. Lenders who choose a term to chase a rate usually regret it.

Decide what you will not do

The most useful thing a new lender develops is a short list of things they decline without agonising. Some will not lend outside the Central Valley. Some will not touch raw land. Some want first position and nothing else. None of these is right or wrong — but having the rule saves you from talking yourself into a file at eleven at night.

Know where our job ends

Worth being clear, because it shapes what you should expect. GAP handles everything up to and through closing — title read, liens searched, the property valued against what it would genuinely fetch, loan to value set, documents drawn, mortgage registered in your favour.

After closing, the borrower pays you directly. Watching insurance, the municipal account and the maturity date is your side of it — light work, but nobody else is doing it. If something looks wrong, call us; we know the file and we help where we can. Our page on how lending works in Costa Rica sets out the sequence.

You do not need to be here

A first-year worry that turns out to be nothing. There is no residency requirement to lend in Costa Rica and no need to live here or visit. Lenders in Canada, the United States and Europe fund files without seeing the property. Where a lender is abroad, funds usually go into escrow ahead of the date and are released when the file is ready to close — covered in escrow and trust in Costa Rica property lending.

Questions from the first year

How many files should I expect to see before one fits?

Several. Declining files is normal and is not a sign that anything is wrong — tell us what you turned down and why, and what comes next will fit better.

Should my first loan be small?

Many people prefer it that way, and it is a reasonable instinct. The minimum is $50,000.

What happens if my first borrower pays late?

Usually nothing dramatic. Late is not default, and most late payments resolve. If it becomes serious, the registered mortgage is your security and you can move to foreclose — see what happens in a foreclosure in Costa Rica.

Can I reinvest when a loan matures?

Most lenders do. Tell us in advance of the maturity date and files can be lined up so capital is not sitting idle.

Start with one file

The first year is mostly a matter of seeing enough files to know your own taste. Look at the current lending opportunities or contact GAP Investments and tell us what you would consider. Nothing proceeds without your decision, and no outcome is promised.

A related trap in that first year is the loan that arrives socially rather than through a file. Lending to friends and family skips every step that makes a loan safe, and the reasons it feels easier are exactly the reasons it is not.

For anyone at the very beginning of this, the mechanics of placing a first loan matter more than the theory. Here is what starting out actually involves, from the first conversation through to the file that gets funded.

This article is for general information only and is not investment, legal, or tax advice. All lending and investment decisions should be made based on independent due diligence and with qualified professional guidance.

Article by Glenn Tellier (Founder of CRIE and Grupo Gap)