Panama Mortgages for Residential Real Estate
Panama Mortgages
Foreigners can obtain residential mortgages in Panama, but the process differs from what buyers may be used to in North America. While U.S. lenders typically base approvals on credit history and income, Panama mortgages and lenders focus primarily on the loan-to-value ratio and your ability to repay the loan.
One key difference is the loan term: Panama mortgages generally come with 10 to 15-year terms, unlike the 30-year standard common in the United States. Additionally, foreign buyers are usually required to make a down payment of around 30% of the purchase price—higher than the amount required for Panamanian citizens. Despite these differences, financing real estate in Panama is accessible for qualified international buyers and can be a valuable part of an investment or relocation strategy.
More documents are required of foreigners than citizens.
Here are the usual documents required by Panama banks for a foreigner to obtain a residential mortgage in Panama:
• Bank mortgage application;
• Entire passport photocopy (certified copy if not present at the bank);
• An additional photo identification photocopied (like a driver’s license);
• Recent utility bill including applicant’s name and home address;
• Credit report (from companies like Equifax, Experian, or Transunion);
• CV (resume) showing education and work history;
• 2 original bank reference letters;
• 2 original commercial or professional reference letters;
• Bank statements for the last 12 to 24 months photocopied;
• Income tax returns from the previous 2 years (or financial statements audited);
• Letter explaining sources of income and reason for purchasing the property;
• Immigration status proof (if you over stayed the tourist visa period);
• Property appraisal from a bank-approved appraiser;
• Receipt of the purchase contract and down payment.
Authentication: Panama banks require all documents from other countries to be “authenticated” either through a Panamanian consulate or by “Apostille” which is a globally recognized type of a government certified authentication of public records.
Self-employed applicants are also required to provide these additional documents:
• Information about the company (name, physical address, phone numbers, website URL);
• A letter describing the history of the company and the type of business the company is engaged in;
• Last 2 years audited financial statements;
• 2 reference letters from companies applicant did business with; and
• 2 original bank reference letters for the company.
Life insurance is also required naming the Panama bank as the beneficiary for the full loan amount. Since the policy is based on the applicant’s life expectancy, it is more expensive for older applicants.
Fire insurance policy on the structures for at least 80% of the loan amount is also required.
The process for releasing funds entails:
• Deed transferring ownership filed in the Public Registry;
• A copy of the filed deed delivered to the bank; and
• Proof that the loan was filed as a mortgage lien on the property in favor of the Panama bank. (In essence, the bank does not disburse the funds to the seller until the bank’s security is in place.)
Things to watch out for in the loan documents include:
• Late payment penalties where there could be as much as a 2% interest rate increase for a late payment. There are no “grace periods” for late payments.
• A clause requiring payments to a “specific branch” which may not allow auto-debiting from the applicant’s account or internet banking.
When obtaining a Panama mortgage, all banks require fixed monthly payments—there are no adjustable or variable interest rates. Each payment typically consists of 85% to 90% interest, with the remaining portion applied to the principal. Over the course of a standard 15-year mortgage, borrowers may end up paying nearly four times the original loan amount due to accumulated interest.
To save money and pay off your Panama mortgage faster, consider making bi-weekly mortgage payments. This involves paying half of your monthly mortgage every two weeks, resulting in 26 payments per year, which equates to 13 full monthly payments instead of 12. That extra payment goes directly toward reducing the principal, which can cut four years off a 15-year loan and reduce interest payments by up to 27%.
However, be aware that some Panama mortgage contracts include clauses that restrict prepayments or principal reductions during the first five years. If this applies to your loan, try negotiating with the bank to allow for early payments. If you’re facing difficulties, it’s advisable to consult a qualified Panama real estate lawyer who can help you navigate terms and negotiate on your behalf.
Contact Us for all of your Panama Real Estate legal needs including assistance with Opening a Personal panama Bank Account and Applying for a Panama Mortgage and Panama Relocation.