Mortgages

I got my mortgage through Banco Popular. My loan officer was very knowledgeable and professional.

Be prepared to put enough down to get a conventional loan. Conforming loans are basically non-existent, unless the property is newly-constructed or possibly a single family.

I didn't know it at the time, but I could have also gotten a mortgage through Costco.

We are moving this summer to PR and may be on the island a minimum of two years and max of 4 years.  We are debating buying or renting.  We house hunted last weekend and did not find a rental that suits our family of 5 but did find a home to buy in Dorado Beach East.  My husbands co-workers in PR are encouraging us to rent and not buy.  They said the market is at the peak of the bubble right now due to Tax 20/22.  We are afraid of buying and having to sell in 2-4 years and having the house drop in price drastically if Tax 20/22 went away.  I don't see it going away in the near future but any insight residents have that have been in PR for a few years since the tax incentive has been in tact I would appreciate any feedback.  We are looking to make an offer next week on the home.  Thank you.

To my knowledge act 20/22 has around 10 more years and could be extended but I am not sure.
If you buy, you should be prepared to hold on to the property for about 7 years. In 3-5 years PR should be coming out of the hole and start to recover, after that the properties will go up in value since there will be less of a glut in properties for sale. Just my opinion!!!!

Correction: the decree is for 20 years with a possible extension of 10 more years. As I read it, the clock starts when your act 20 or 22 is approved.

The only lender on the mainland that I'm aware of capable of writing mortgages in PR is SunWest.  I had a horrible experience with them. 

Whenever I tried to work with a bank on the island, language issues got in the way.  I'm sure that if I had simply walked into the bank, my experience would have been much different.

Regarding buy vs. rent, my advice is to rent.  Mortgage rates are very low.  When those rates rise, house prices will fall.  Moreover, it may be the case that Act 20/22 has minimally increased demand, but only minimally.  Real estate prices have been falling since 2007-8, and given the austerity measures on the near horizon, expect prices to continue to fall.

I suspect that Rey's projection of a recovery in 3-5 years is rosy.  I certainly hope that I'm wrong, but I don't see the economy turning around in less than ten years.

Maybe a bit optimistic, yes.
Let me provide more detail.

The next 2 years is going to be hell, with all the layoff and cuts. This will affect the goverment and private sector since those that have no jobs spend little or emigrate.

In 1 more year (3rd year) things will stabilize, it will stop getting worse in other words. By the 4th or 5th year you will start seeing some small recovery, probably with situation about the same as it is today. 6th-7th year I see a little faster recovery, which should get PR economy to what it was in 2014. Recovering to the point of the level of 2006 when things were great, it is gong to go past 10 years.

So there is better but it is relative to the year you compare it to.

I'm a lender and most mainlanders have the same problem. They can't use there US bank to make the transaction because recent federal rules require lenders to be licensed per state or territory. Since they don't have (US) commercial banks on the Island they don't have the need to offer mortgages in PR.

PR being a US territory have access to most of the products and or loan types offered in the USA as VA loan, FHA, Reverse Mortgages, FNMA, Usda and Conventionals from FNMA in which you could get low interest rates with amortization up to 30 years. (Interest rates in PR are .5%-.75% higher).

Try to move quick because the FED is planning to raise interest rates in their next meeting now in March depending on the jobs report.

Good luck!

Hey Danny let me pass something by you and see what you think.
I was going to build my home from the proceeds of the sale from my home in the states and was thinking of building a second floor by getting a bank loan afterwards. The intend was to then move myself to the top floor and use the lower unit for AirBnb with any gains going toward paying the loan in 5 years. After that any money made would go toward investing maybe on a second property close by where I can also then put it up for AirBnb again. Repeat until I have 3 to 4 units in Airbnb.
Crazy?

I suggest you to do a home loan and not to use your personal savings. Use your money to repair or as a downpayment to obtain the lowest monthly payment you want to manage. About building a property from scratch I have my concerns because you need a lor of planning and permitts. Also cost wise, because with the new taxes of 11% and b2b 4% tax, construction prices have elevated. To build a house could delay months depending on third party providers and weather. So, there's a lot of risk about building and at the same time you will need a place to live so you are going to be paying rent plus material and workers, plus following up on every detail of the construction.

I think that there's many inventory available, opportunity that you can afford with very low investment, at a very good price and you could make the repairs as you want it. You can buy it with 2 up to 4units and begin making Airbnb's as soon as 2 months. Buy it, make repairs, put some nice furnitures, then took photos and boom!

It was really nice to give you my opinion. Don't hesitate to ask me.
Respectfully,
Danny

Thanks Danny,
However we already purchased a 1.67 acre lot overlooking Roosevelt Roads base and the bay and are prepared to rent while we built the house. Taking a construction loan is probably how we will go at first then decide to either pay it off or convert to a regular loan. We love the location and have very few homes around us like we like. Most of the area has farms and lots not being used so it is peaceful. We do expect to do some major changes there like build a road in the lot, move some of the dirt around to increase the flat area and build the house and a pool. I will be using very little of my savings.
Thanks

Rey,

It seems to me that both you and Danny have some good ideas, and my advice is to think through this quite carefully.

From what you asked, it looks like a construction loan is what you want, which would enable you (with the proceeds from the sale of your current house) to build both floors at once.  Your ownership of the land, with significant cash to put toward the construction, should make getting a construction loan for the remaining costs pretty easy.

However, Danny raises some good points.  It may be that after building your one-story dream home with cash you might search for good deals on existing properties which, with a little work, can be real gems for AirBnB.  Given the costs and headaches associated with new construction, and the buyers' market right now, you may want to take an equity loan and use it to buy existing investment properties.

It appears you have a few options, and quite a bit to think over.

Yes Warner lots to think about.
The wife wants to offer the downstairs home for AirBnb, because she is social and wants to be there to do the cleaning and allow the renters to use our pool.
I on the other hand would prefer to offer the renters a condo that has a pool for all the condos there and let somebody else take care of those pools and grounds. This way I do things with my property for my family enjoyment and not for the renters enjoyment.
So we have a lot still to talk about but we agree in most other things.
If we go with Condos for Airbnb I would look into loan assumptions if possible or repo units to lower my cost.

The only things in my mind about getting a loan are that I just got there and that my only income would be my social security plus my IRA which I will avoid using if at all possible. I manage it and I am getting 15 to 20 percent increase average per year by playing on the stock market. So the longer I delay using it the more I can grow it. Will they give a mortgage for somebody on Social Security?

If you build a modest home with cash, you can take an equity loan on that, and invest it into a rental (AirBnB).  Now you have rental income.

Sounds like you will want some good advice from loan officers and financial planners.  Quite a lot of options.

Yea, sounds like I should take my friend the financial planner to breakfast again. Never charges me anything. He handles only accounts of over 500k but for me no charge, just a breakfast and I am not a client of his either.

Do the construction loans have time constraints and deadlines on certain processes of the construction in PR?  We built our home in the states and decided to not do a construction loan but a line of credit on our home we were living in at the time.  That way if deadlines were not met, we didn't run into trouble with the bank.  Just wondering....

I used to do construction loans. First, is important for you to know that most lenders doesn't work this type of loans currently. They are considerate high risk loans because of the projected value of the property could change at the moment you finish the construction. Most property values are declining right now. 
No time restrictions. You are the first who will want to finish because you will begin paying the mortgage since day 1 for the phase 1 disbursement. Then you will continue paing by the total amount accumulated for each phase. I have a friend that could assist you because he work for a credit union. PR credit unions (some) are the ones offering construction loans. If the use is going to be a primary residence they could finance 100% of labor cost and materials if the loan is the 80% or less from the projected value. If is second home or investment, they are going to finance less. Terms 30 years fixed and interest rate above five percent, then you could refinance to a conventional loan to find a lower interest rate. In that I can assist you then.

I wish this info could help you.

Best regards,

Daniel

Schuttzie wrote:

Do the construction loans have time constraints and deadlines on certain processes of the construction in PR?  We built our home in the states and decided to not do a construction loan but a line of credit on our home we were living in at the time.  That way if deadlines were not met, we didn't run into trouble with the bank.  Just wondering....

Don't know but expect delays during construction. A lot of structural work can not be done if it rains or is too muddy. A lot of time they come in very early and leave by 2 or 3 in the afternoon. Expect 9 to 12 months construction for cinder block construction in most cases. If doing prefabricated concrete, the sections are casted at their plants and have to be able to get it to your place, if too hilly or streets are too narrow the vehicle can not get there.

I am considering the M2 construction method which is much faster construction.
https://www.youtube.com/watch?v=YD5kqiDE53w also https://www.youtube.com/watch?v=SPPE9XgeOyI
The two are different panels but they are similar construction. Panels can be cut to any shape so you can get pretty fancy. Construction is much faster and if you are going to use air conditioner, these panels offer good insulation since they have a fire resistant foam core.

When using the standard cement blocks they have to chisel into them to put wiring and tubes, with these panels they melt the core foam and insert the electric and plumbing inside the wall before it is covered by concrete so it is a much nicer finish. A lot of villas and hotels of 4 of less floors use this type of construction in PR.

That same house using these panels can be put together in 3 months instead of 9 or 12, the main thing is the foundation and the rest goes very fast. You save on labor and time but materials are a little more.

That sounds a great plan, Rey!

For my first purchase in PR, I set up a Home Equity Line of Credit on my New York house.  I used this to  pay cash for my PR condo.  Then, when I sold my house in NY I paid off that loan.   I avoided having to get a mortgage for  my PR condo and there was no lien against this property.

Schuttzie wrote:

That sounds a great plan, Rey!

Did you watch the two videos?

frogrock wrote:

For my first purchase in PR, I set up a Home Equity Line of Credit on my New York house.  I used this to  pay cash for my PR condo.  Then, when I sold my house in NY I paid off that loan.   I avoided having to get a mortgage for  my PR condo and there was no lien against this property.

Great idea, if one has enough equity that can get a line of credit big enough to build or purchase in PR this can work good.

We build our house with our savings. The rental property we got a good deal and was able to buy it cash. Mortgages in the island are very hard to apply for. We tried to get a construction loan and was blown away by all the fees they wanted so we decided against it.

Yes, I watched the videos, very interesting.  It seems very similar to something I'd watched being constructed from a blog in Ecuador.  It seems to be a wonderful idea

adlin20 wrote:

We build our house with our savings. The rental property we got a good deal and was able to buy it cash. Mortgages in the island are very hard to apply for. We tried to get a construction loan and was blown away by all the fees they wanted so we decided against it.

You used standard cement blocks on your construction?
What do you think of the constitution method in the videos I posted?

Rey,

It looks promising, we did our house the old fashioned way of bricks and mortar. My concerns with this type of construction is finding knowledgeable workers in the island and how will affect in the future if I want to expand or made modifications. Also, cost, they say is cheaper but if only one or two persons know how to work with it you are limited to their price. Not much room to bargain there.

There are constructions companies in PR that offer this type of construction, as to how many in surrounding towns I do not know. But the west and Fajardo has at least 2 companies if not more.

ReyP wrote:

There are constructions companies in PR that offer this type of construction, as to how many in surrounding towns I do not know. But the west and Fajardo has at least 2 companies if not more.

I will try to have them compare cost based on same house designs. Also, one of my concerns will be electrical and plumbing design. The video shows open cabling enclosed with plaster on the walls. Thinking about the future, what will happens if you need to change the cables? Or run new connections? Run for expansion? Will you be stuck dealing with them for any repairs or expansion? What will happens if some of the panels needs replacement or came defective?

It's not that I am opposed, but too many unknowns with new construction way, specially in the island.

adlin20 wrote:

I will try to have them compare cost based on same house designs. Also, one of my concerns will be electrical and plumbing design. The video shows open cabling enclosed with plaster on the walls. Thinking about the future, what will happens if you need to change the cables? Or run new connections? Run for expansion? Will you be stuck dealing with them for any repairs or expansion? What will happens if some of the panels needs replacement or came defective?

It's not that I am opposed, but too many unknowns with new construction way, specially in the island.

Re-pulling electrical wire through the conduit would be easier than in most stick-built homes and with wireless routers being the norm, it seems less and less is needed cabling wise.  But, even then the video showed the inner-duct in which the cabling would be pulled.

ICF is not new and I see more and more builders and developers using this concept.  It does require a builder experienced in installing it.  It is ideal for the Caribbean and high humidity areas historically plagued with mold issues as well as areas subject to high winds and even hurricanes.  I quickly found some other ICF resources that I found interesting:

http://www.caribbeanicfsolutions.com/http://www.icfmag.com/articles/features … l_ICF.html

I think Rey your upfront investment will provide quick return on your money in terms of have a safer, higher quality home with lower long-term operating and maintenance expense.  Keep up the search!  Great idea.

Yes, experience with using the technique and materials would make a big difference, also having more than one possible contractor to get a better price would be wise. My expectations are that once the foundation is in place, the rest will go much quicker and lower labor cost should balance the higher cost of materials. Have to be careful with the cost of windows and doors that tend to inflate the price depending on what is selected.
While I have no plans to use airconditioner on the entire house, the insulation properties will be very helpful for the bedrooms which will have air.
Thanks guys

We are in the underwriting process currently with RF Mortgage out of San Juan. The condo will be our future retirement home, so is now considered a vacation home. We will not be renting it out.  It is a foreclosed property and Banco Popular immediately accepted our offer last month and hopes to close by the end of March. I was told the process would be lengthy, but so far it has been okay.   I have not had any issues with language barriers either.

Lucky you Susan, your offer must have hit the spot.  Hope all goes well and that the repairs needed are minor.

Thank you Rey! We have to replace patio doors and hurricane shutters.  There was some water damage, but I can fix the drywall myself I'm just hoping that underwriting comes back with a definite yes this week. With so many foreclosures, I understand why they need so much information, but sheesh. You'd think we're purchasing a $600000 condo instead of 60,000.  It'll all be worth the headaches and frustrations

SusaninPR wrote:

Thank you Rey! We have to replace patio doors and hurricane shutters.  There was some water damage, but I can fix the drywall myself I'm just hoping that underwriting comes back with a definite yes this week. With so many foreclosures, I understand why they need so much information, but sheesh. You'd think we're purchasing a $600000 condo instead of 60,000.  It'll all be worth the headaches and frustrations

60K, you got it cheap, if your credit is good  and you provide a good down you should be set. Start looking for the right curtains for the place.

It is possible to 3D print your house, see video. I wonder about possible creation of aboriginal type housing using this technique.
http://www.businessinsider.com/house-3d … sia-2017-3

could not see the website, due to my adblock... but I can survive without it. How big is the 3d printer, to print out a house!? I was reading YEARS ago, in Mother Earth News, about adobe & Cobb home building, some of that stuff can be stronger than concrete. I believe there are houses/buildings close to 1,000 years old, still being lived in, in England.