Complete Guide to Buying a Home in Mexico: Credits and Taxes

Buying a home is exciting and often overwhelming. This guide is your A-to-Z roadmap, demystifying every step of the process, from credit to closing, to ensure the most important financial decision of your life is also the smartest.

The path to purchasing a property in Mexico is filled with critical decisions, procedures, and concepts that can seem like a maze for the uninitiated buyer. However, with a clear roadmap and the right information, the process becomes manageable and safe. This definitive guide will guide you step by step to make the dream of owning a home a reality, avoiding the most common and costly mistakes.

Step 1: The Basis of Everything – Finances and Credit Pre-Approval

Before even opening a real estate portal, the first step is internal: an honest analysis of your finances. The golden rule of financial advisors is that your monthly mortgage payment should not exceed 35% of your monthly net income.

The Buyer's Secret Weapon: Credit Pre-Approval. Approach your bank or financial institution before searching for properties. Getting a pre-approval letter gives you two invaluable advantages:

* Clarity: You will know exactly what your real budget is.

* Negotiating Power: Show the seller that you are a serious and solvent buyer, which puts you in a better position when negotiating the price.

The Two Financing Methods in Mexico

There are two main ways to finance the purchase of your home:

* Institutional Credits (INFONAVIT and FOVISSSTE): Intended for workers in the private and state sectors, respectively.

* INFONAVIT: To be eligible, you must have a current employment relationship and achieve the required score of 1,080 points. The loan amount will depend on your age and salary. One of its greatest advantages is the Cofinavit scheme, which allows you to combine the Infonavit loan with a bank loan to access a higher-value property. The balance in your Housing Subaccount is used for the down payment, and future employer contributions help pay off the debt.

* FOVISSSTE: For state workers, it works similarly, granting loans in Measurement and Update Units (UMA) with interest rates of 4% to 6% and payroll deductions.

* Bank Loans: Open to the general public, they offer a wide range of products. The key here is not to be swayed by the advertised interest rate alone. The key indicator to compare is the Total Annual Cost (CAT), as this percentage includes the interest rate, fees (such as the origination fee), mandatory insurance, and other expenses, giving you a realistic view of the cost of financing.

| Bank | Fixed Interest Rate (Example) | Average APR | Estimated Monthly Payment (per $1,000,000 MXN over 20 years) | Key Advantage |

|—|—|—|—|—|

| HSBC | From 10.45% | 12.7% | ~$10,000 | Competitive interest rate. |

| Banorte | From 11.18% | 13.7% | ~$10,500 | Offers premium rate products for specific profiles. |

| BBVA | From 11.20% | 13.9% | ~$10,600 | Extensive network and products segmented by credit value. |

| Santander | From 10.25% | 12.6% – 15.8% | ~$9,900 – $11,800 | Programs like “Hipoteca Free” that reduce the rate for on-time payments, shortening the term. |

| Scotiabank | Average rate 13.18% | 15.3% | ~$11,800 | Co-financing available with Infonavit Support. |

| Note: Rates and APRs are examples based on 2025 data and may vary depending on customer profile and market conditions. This is intended to illustrate the importance of comparison. | | | | |

### Step 2: Property Search and Due Diligence

Once you have your budget and pre-approval in hand, begin your search. Beyond aesthetics, focus on the structural quality, location, and, most importantly, the legal status of the property.

The Central Role of the Notary Public: In Mexico, the Notary Public is not a mere formality; he or she is the legal arbiter of the transaction. It is their responsibility to conduct crucial research to protect your purchase:

* Request the Certificate of Freedom from Encumbrances from the Public Property Registry to confirm that the property is free of debts, mortgages, or liens.

* Verify that property tax and water payments are up to date, requesting proof of non-payment.

* Drafts the public deed and ensures that all documents are in order.

### Step 3: Closing – Understanding Closing Fees

This is where many buyers are surprised. You should budget between 5% and 8% of the property's total value to cover these expenses, which are in addition to the down payment.

Expense Breakdown (Paid by the BUYER):

1. Real Estate Acquisition Tax (ISAI): This is the most significant tax. It's a state tax, so its rate varies. In most states, it's around 2%, but in places like Nuevo León, it's 3%, and in Mexico City, it's a progressive rate that increases with the property's value. It's calculated based on the highest of the purchase price, the cadastral value, and the appraisal value.

2. Notary Fees: This is the payment for the notary's professional services, which include research, drafting, and managing the entire process. These fees generally range between 1% and 2% of the property's value.

3. Registration Fees in the Public Property Registry (RPP): This is the cost of officially registering the deed in your name.

4. Appraisal: The official appraisal of the property, an essential requirement for any mortgage loan.

### Step 4 (For Sellers): The Key Tax – ISR for Alienation

If you're on the other side of the transaction, your main tax obligation is Income Tax (ISR), which is paid on the profit you make from the sale.

"The golden rule for sellers: know the 700,000 UDIS exemption. It could save you millions of pesos in taxes and is the key to maximizing your net profit."

* How to Exempt Income Tax: The law offers a huge tax benefit, but under strict conditions. You can exempt (not pay) income tax if you comply with ALL of the following:

1. The property sold was your home (your primary residence).

2. The sale value does not exceed 700,000 UDIS (Investment Units), which is equivalent to approximately 5.8 million pesos (the exact value changes daily).

3. You have not used this exemption benefit in the last three years.

* To verify that it was your home, the notary will ask for documents such as your National Identity Document (INE) with that address, electricity bills, phone bills, or bank statements in your name with the property's address.

* What if I can't exempt it? If the value exceeds the limit or it wasn't your home, you'll have to pay income tax on the profit. To reduce your tax, you can deduct expenses such as: the original acquisition cost (proven with your previous deed), renovations and improvements (as long as you have the corresponding tax invoices), and notary fees and commissions you paid when buying and selling.

### Conclusion: A Complex, but Conquerable Process

Buying or selling a home is one of life's most important financial transactions. Although the process is complex, being armed with the right knowledge about credit, taxes, and the roles of each participant allows you to take control, negotiate with confidence, and protect your assets. This guide is your checklist for a successful transaction without surprises.

This article is for informational and educational purposes only. Real estate investing involves risks and complex decisions. We recommend seeking the advice of certified professionals (real estate agent, notary public, financial advisor) before entering into any transaction.