Secured Loans in Costa Rica: What Actually Backs a Private Loan
Every lender asks the same question before sending money: what actually stands behind this loan if something goes wrong? With secured loans in Costa Rica, the answer is a registered mortgage over titled real estate, a conservative loan-to-value and a closing done properly by a Costa Rican attorney and notary. This guide explains how that security works for private lenders working with GAP Investments, how it is put in place, and what it cannot do.
How secured loans in Costa Rica differ from unsecured loans
An unsecured loan relies on the borrower’s promise to pay. A secured loan adds a specific asset the lender can look to if that promise fails. In GAP’s standard loans, that asset is titled property registered in Costa Rica’s National Registry: a house, a condo, a commercial building or a lot. Coastal concessions are not titled property and are not used as security.
Three things decide how strong the security really is:
- Position: whether the lender is first in line against the property.
- Cushion: how much the property is worth compared with the loan.
- Paperwork: whether the mortgage is documented and registered correctly.
The first-lien mortgage
On every standard GAP loan, the lender holds a first-lien position. GAP does not arrange second-position loans. If the property already has a mortgage or another recorded lien, it must be paid off before or at closing so the new lender’s mortgage is the first one registered.
Position matters because a lender behind another creditor is paid only after that creditor. First position keeps the lender’s claim on the property ahead of later liens.
Why the National Registry matters
Under Law 3883, the purpose of Costa Rica’s National Registry is to guarantee the security of registered property and rights with respect to third parties by making them public. For a lender, that public record does two jobs. Before closing, it shows who owns the property and what is already recorded against it. After closing, it shows the lender’s mortgage to anyone who later looks at the property.
Before a loan is offered to a lender, the property is reviewed on paper and on the ground:
- ownership and how the title is registered;
- existing mortgages, liens and other recorded entries;
- the registered survey plan and whether it matches the land;
- legal and practical access to the property;
- condition, location and how easily the property would sell;
- municipal property tax standing.
The borrower’s paperwork is part of the same review. Our guide to the documents a Costa Rica property loan needs lists what is usually requested.
Loan-to-value: the cushion behind the security
A mortgage is only as useful as the value behind it. GAP prefers a loan-to-value of around 30% or less, and 50% is the maximum for the standard product. At 30%, a US$100,000 loan sits against a property valued at roughly US$333,000, which leaves room for price changes, selling costs and time.
A borrower’s claimed value is not the value used. GAP determines the valuation used for loan-to-value, with the lender’s input and acceptance. Land and less marketable properties are reviewed more strictly. Our article on loan-to-value for private lenders goes deeper.
Our standard-loan lender always goes into first position. We don’t do second-position loans, and if there’s an existing mortgage, it has to be dealt with before or at closing. On loan-to-value, 50% of the value GAP determines is the ceiling. Lenders tell me they prefer about 30% or less.
Glenn Tellier, founder of GAP
How the security is put in place at closing
GAP coordinates the closing with an experienced Costa Rican attorney and notary. That includes the loan documents, the payoff of any existing liens, the registration of the lender’s first-lien mortgage and the flow of funds. GAP closes loans within 10 business days once the required documents are complete.
Standard loans run from six months to three years, with monthly interest-only payments and the principal due at maturity. Lender rates range from 9% to 16% a year, set loan by loan, and the lender receives the full agreed rate because borrowers pay the loan fees. After closing, borrowers pay the lender directly.
Mortgage or guarantee trust?
A registered mortgage is the usual security, but some loans use a guarantee trust instead. Each works differently when a borrower defaults. We compare them in mortgage or guarantee trust: which suits the lender.
If the borrower stops paying
Under Law 8624, the Judicial Collection Law, a properly registered mortgage is an enforcement title over the mortgaged property (article 8), and the law sets out the court process for enforcing it, including auction. That is what gives the security real force.
Enforcement is still a last resort. It takes time and legal cost, and most payment problems are handled well before court. GAP can help with communication when a borrower or lender reports a problem. See what happens in a foreclosure in Costa Rica for the practical side.
What security does not do
Even well-structured secured loans in Costa Rica carry risk. Security reduces it; it does not remove it.
- It does not guarantee on-time payments or any return.
- It does not make recovery quick; enforcement can take a long time.
- It cannot fix a weak property. Poor access, title problems or an unrealistic value weaken the security from the start.
- It does not replace your own legal and tax advice.
Anyone planning to lend in Costa Rica as a regular activity should also understand what SUGEF means for lenders. For a wider view, read the real risks of private lending in Costa Rica.
Frequently Asked Questions
What backs secured loans in Costa Rica?
On GAP’s standard loans, a first-lien mortgage over titled property registered in the National Registry, at a conservative loan-to-value.
Can a lender be in second position?
Not on GAP’s standard loans. Existing liens are paid off before or at closing so the lender holds first position.
Do I need Costa Rican residency to lend?
No. Lenders of any nationality can lend through GAP, and residency is not required.
Does a mortgage guarantee I get my money back?
No. A registered mortgage can be enforced in court, but enforcement takes time and cost, and no return or recovery amount is guaranteed.
This article is general information only and is not legal, financial or tax advice. Legal references are summaries of Costa Rican law as published in SCIJ; confirm how they apply to a specific loan with a Costa Rican attorney. Every loan depends on property review, documentation and lender approval.
WhatsApp us at +506 4001 6413 to get started.
Want to see how this looks on a real file? Read how lending works with GAP, browse current lending opportunities, or email info@gap.cr.
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Private lending · First-lien security · More deal flow at 9-10%
Article by Glenn Tellier (Founder of CRIE and Grupo Gap)
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