How to get a loan to buy real estate in the Dominican Republic
Some of our clients need financing when purchasing real estate in the Dominican Republic, so in this article I would like to explain in detail how real estate financing works in the country.
The process of obtaining a mortgage or a line of credit here is very similar to what buyers are used to in the United States and Canada, but it does have its own nuances. It is best to apply for credit approval in advance, because the process is not instant. It may take about a month when purchasing a resale property, and up to two months if you are financing the purchase of a new development. In recent years, the lending market in the Dominican Republic has been growing very quickly, and as financing develops, loan programs and approval conditions continue to change. As in any country, the Dominican Republic has several major banks, as well as other financial institutions that issue mortgages and lines of credit. They offer different programs and use different approaches to qualification.
Finding out which bank offers which program can take a great deal of time. In addition, if you do not speak Spanish, the language barrier can often become a real obstacle. The best solution is to contact us. We work with The Lending Brokers, a mortgage company that has been active in the Dominican Republic’s lending market for many years, and we will connect you with one of their mortgage brokers. This will save you a significant amount of time and, most importantly, help you obtain financing at the best rate available for your specific situation. The Lending Brokers have long-standing, well-established relationships with most banks and financial institutions in the Dominican Republic, and they are true professionals in their field. They have already helped dozens of our clients secure financing for real estate purchases and have proven themselves extremely reliable.
The first thing your mortgage broker will do is pre-qualify you in order to determine which bank program would be the best fit for your profile. The entire process can be completed remotely by sending your documents to the mortgage company by email.
What documents will you need?
First, you will need two pieces of identification. Usually, this means a copy of the first page of your passport and a copy of both sides of your driver’s licence. Next, you will need to provide proof of income. For Canadians, this is a T1 form, or a T2 form if you own a business or are self-employed. A Notice of Assessment for the previous year is a useful addition, although it is not mandatory. If your income comes from employment, you can provide a letter from your employer and pay stubs for the last two months. You will also need to send the mortgage company bank statements from your personal account and business account, if you have one, for the last six months, showing that you receive income on a regular basis. Dominican banks do not have access to your Canadian credit history, so you will also be asked to provide an Equifax credit report, which you will need to request yourself through the credit bureau’s website. Within a week, the mortgage company will review the documents you have provided and give you a detailed analysis of which bank can offer you financing, for what amount, and at what interest rate. It is important to understand that the mortgage company is not the bank that will be lending you the money. They work on your behalf and, if needed, will of course advise you on which additional documents should be provided or what should be adjusted in your application package so that you can obtain the best possible loan terms.
After that, the decision is yours. Once you choose the bank and the terms, the mortgage company will submit your complete document package to the bank you selected. The bank’s review process usually takes from two to four weeks. For new developments, the application review process is usually a little longer. If your loan is approved, you will receive notification that the bank is ready to close the transaction, and all that remains is to agree on the closing date.
To service your loan in the future, you will need an account at a Dominican bank. It is better to open one in advance, as this makes the mortgage process significantly easier. I recommend opening two accounts: one in Dominican pesos and another in U.S. dollars. Your mortgage can also be issued either in pesos or in U.S. dollars, although I have not heard of foreign buyers taking financing in the local currency. As a rule, real estate buyers take their mortgage loans in U.S. dollars.
As of today, U.S. dollar mortgage rates range from 8% to 11%, depending on the bank and the program selected. However, lending rates continue to decline, and most likely within a year they will return to pre-pandemic levels, when mortgages were available at 5–6%. Financing is possible for up to 80% of the property value, although to receive the best rate, the loan amount is usually no more than 70%. The closing itself takes place directly at the bank: you sign the mortgage documents pledging the property being purchased as collateral, the bank transfers the funds to the seller, and your lawyer completes the transaction. In reality, everything is very straightforward and does not involve any hidden pitfalls.
The financing process for new developments works somewhat differently. When you buy a new development, the developer itself provides you with an installment payment plan. A standard purchase contract usually requires 25% at the time of signing, while another 45% is paid in smaller installments during the construction period. Three months before the keys are handed over, the developer notifies you that construction is nearing completion, and at that point banks begin processing the financing. In other words, the apartment or villa is already practically finished, the transfer of ownership from the developer to you will take place in about three months, and by that time you will usually have already paid 70% of the purchase price.
You can pay the remaining balance yourself and own the property without a mortgage. But if you want to use financing, this is the right moment to approach the bank. You choose the loan amount yourself, but it cannot exceed 80% of the purchase price. You can borrow the remaining 30% that you still owe the developer, or you can take a larger amount — any amount up to 80% of the property value. If you choose the second option, then at closing the bank will transfer to the developer the amount you still owe, and the remaining funds will be deposited into your bank account. You are then free to use that money however you wish.
Another difference in real estate financing in the Dominican Republic is the mortgage amortization period. Here it is not 25–30 years, as it often is in the United States or Canada, but 15 or 20 years. As a result, monthly payments are significantly higher. However, short-term rental income here can be so strong that if you use the property yourself for two or three months a year and rent it out for the rest of the time on a nightly basis through the condominium management, the rental income is usually enough to cover both the mortgage payments and the property maintenance costs.
That is why financing can still be beneficial here, even at higher interest rates than in the United States or Canada. With the money you keep available, you can purchase a second property in the same way, and then continue building from there. Over several years, this can become a strong investment portfolio.
If you have paid for your property entirely from your own savings and later need money, you can approach a bank at any time and obtain the amount you need. Lines of credit secured by real estate are very popular. Their advantage is that a credit line can be paid off at any time and used again whenever necessary. At the moment, credit lines issued in the Dominican Republic and secured by real estate cannot exceed 50% of the property value. Dominican banks are very open to issuing real estate-backed loans to foreigners. No one will examine you under a microscope the way banks often do in the United States or Canada, and Dominican banks simply do not have the same ability to do so. For Dominican banks, foreigners buying real estate in the Dominican Republic are generally considered creditworthy by default. Applicants simply need to prepare the document package properly, and the mortgage company The Lending Brokers, with whom we work, does this job exceptionally well.
Another important point is that loans issued in the Dominican Republic do not appear on your Canadian credit history and do not in any way complicate your ability to obtain new financing in Canada. For many buyers of Dominican real estate, local financing inside the country is therefore a very attractive option. Nevertheless, most of our clients today still use financing within Canada to purchase real estate in the Dominican Republic, either by taking out a line of credit or by increasing the amount of the mortgage secured by property they already own in Canada. At the moment, this type of financing is less expensive.