IL Postcard

Obtain a Preferential Mortgage Rate on Your Panama Property Purchase

Date: 06/18/2007

Panama may well be one of the best places in the world to buy a modest home. For years, Panamanians (and a few savvy expats) have taken advantage of the Ley de Interés Preferencial, or "Preferential Interest Law," to obtain exceedingly low interest rates on mortgages of under $62,500. No wonder Panama has such a high percentage of homeowners-among the highest in Central America, according to local daily La Prensa.

Up to now, the preferential interest law has only applied to homes with a sale price of $62,500 or less. In the past, the construction industry profited from building homes that met this price limit, but rising prices means it is now difficult to find a decent home within this range.

The good news: the Panama Ministry of Housing (MIVI) and Chamber of Construction (CAPAC) are trying to determine a new price threshold. CAPAC has proposed that the limit be raised from $62,500 to $82,000, because construction materials (such as cement) have become much more expensive, thus raising housing prices.

Housing Minister Balbina Herrera says the issue is an important one and that a special commission has been appointed, within the cabinet, to examine the various proposals that have been made by CAPAC and other interested parties.

The law currently entitles buyers of low-cost homes to interest rates up to some four percentage points below a bank's regular rate. Basically, for the purchase of a home of up to $16,000, you pay an interest rate of 2%; for a home of up to $25,000 you pay 2.5% interest and for homes of up to $62,000 you pay just 3% interest. In a country where regular interest rates are currently between 6.5% and 7.25%, the potential to save is great.

Good news for expats: the preferential interest law is not limited to Panamanian citizens. Anyone meeting the price requirement can apply. Among other limitations, the home must be new and it must be the buyer's primary residence. Most banks limit the mortgage term to 15 years.

We'll keep you posted as the special housing commission releases its findings.

Best Regards,

Jessica Ramesch
Editor, Panama Insider
International Living

P.S. Despite rising real estate costs, there are still many bargains to be found in Panama. To keep up with the best of what Panama has offer, check out Panama Insider. Each month we tell you where to go to find the bargains and what to do once you have. Real estate, immigration, where to shop, who the best resources are… we tell all in the Panama Insider.Learn more here.