How Investment Property Financing Works in Costa Rica

People arriving from North America or Europe carry an assumption with them: that a good property with a solid buyer behind it can be financed. In Costa Rica that assumption breaks, and understanding exactly where it breaks is what makes this market work for lenders.

The bank route, and who it is open to

Banks here do lend against property. The obstacle is not the property — it is the borrower. Bank credit requires permanent residency, and permanent residency takes four years at minimum to obtain. That single requirement removes most recent arrivals from the banking system regardless of how much equity or income they have.

Even for those who qualify, the process is slow by the standards anyone is used to, and rates offered to foreign applicants sit closer to private lending rates than newcomers expect. The gap between the two is smaller than the conversation usually suggests.

Which is why so much of the market is cash

Walk through the sales listings and you will notice how many transactions close without any financing at all. That is not a cultural preference. It is the arithmetic of a market where the ordinary buyer cannot borrow, and it has two consequences a lender should hold onto.

The first is that the pool of buyers for any given property is smaller than it would be in a financed market, which is why an exit through sale takes longer here and why loan-to-value discipline matters more. The second is that a great many owners hold their property free of debt, which is exactly the profile a lender wants on the other side of a file.

Where private capital fits

A private loan against property does what the bank will not: it looks at the asset and the exit rather than at an immigration file. The structure is plain. A registered first lien on a specific property, an amount well below what the property is worth, interest paid monthly and principal returned at maturity.

Terms run from six months to three years and rates from 9% to 16% annually, set by what the individual file shows rather than by a rate card. Loans start at $50,000 with no ceiling. Closing costs run to roughly 8% of the loan between legal fees and GAP’s fee, and who carries that is agreed before anything is signed.

What the money is usually for

Four purposes cover most of it. Purchasing, where a buyer needs to move faster than any bank could approve. Releasing equity from a property already owned outright, to fund a business, a renovation or another purchase. Bridging, where a sale is underway and the timing does not line up. And construction or commercial projects, funded in stages against a draw schedule rather than in a single advance.

That last category behaves differently from the others and is worth understanding on its own terms, because the money goes out against progress rather than all at once.

What decides whether a file is fundable

The cushion. How far the property’s value would have to fall before the loan is exposed. The position. First lien or nothing — order of registration decides who is paid. The exit. Which specific event returns the principal: a sale, a refinance, business cash flow, a residency approval that opens the bank door. And the owner. Who they are and why they need the money now.

Those four questions do more work than any rate comparison. The first one in particular carries most of the weight.

After the closing

The borrower pays the lender directly, on the agreed dates. GAP prepares the file, verifies the Registry record, orders the appraisal and coordinates the closing; that work ends the day the loan closes. Nobody collects instalments on your behalf afterwards. Most lenders call us anyway when something comes up, and we help where we can.

How long a closing takes

From a lender saying yes to funds moving, a few weeks is normal. Two things set the pace: registering the lien, and the state of the borrower’s documents.

Where a company owns the property — which is common here — the company’s books and the signatory’s authority have to be current, and that is where most delays originate. It is almost never the property itself. This is why the file is assembled before it is presented rather than after a lender has committed.

What happens at year four

Worth understanding, because it shapes the exit on a lot of files. A borrower who is working through residency will eventually reach permanent status, and the bank door opens. At that point refinancing to a bank becomes possible and frequently that is exactly the plan.

A private loan is often deliberately a bridge across that waiting period rather than a permanent arrangement, which is why terms of six months to three years suit this market so well. A file whose stated exit is “refinance once residency comes through” is describing something real — provided the timing on the application is checked rather than assumed.

If a payment runs late, the late-payment terms come into play and most situations resolve with a conversation. If it goes further, the lender may begin enforcement against the security, on their own timing and with their own attorney.

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