GE Money to fund Mexican Mortgages for U.S. citizens

I knew it was only a matter of time before U.S. financial services realized that there was money to be made in Mexico.

GE Money, the financial services arm of General Electric Co. (GE), is planning to lend nearly $150 million to U.S. residents who want mortgages to buy residential during the first half of the year, GE Money plans to expand its product offering with a cash-out refinancing product that will allow citizens from the U.S. who already own property in Mexico to unlock the equity in their homes, and mortgages to buy homes under construction. To date, GE Money has only financed finished apartments and houses.

Last year the company invested nearly $60 million in Mexican home mortgages to U.S. citizens, and GE Money is anxious to tap into this growing market, which is estimated to be worth billions of dollars and, until very recently, has grown tremendously with little or no mortgage financing.

Most of the expats who retire to Mexico do so after they sell their homes and other assets in the U.S. If you read the San Miguel fieldwork diary (see link to the right), you'll see that not having a mortgage was one of the appeals of living in San Miguel and other areas in Mexico, where the cost of living has been relatively less expensive than here in the U.S.

Financiers expect that by offering mortgages in Mexico, the demographics are working in their favor, as nearly 78 million baby boomers will start retiring in the next decade, and many are expected to look to Mexico, where property prices have not reached the stratospheric levels observed in popular retirement destinations in California and Florida.

In addition to the numbers of baby boomers who will be looking for an inexpensive retirement location, the privatization of Mexico's airport industry, coupled with the emergence of low-cost carriers in the past five years have also accelerated this trend. Easier access to places like San Miguel de Allende have made it possible for people to think of Mexico as a place to keep a vacation or weekend home.

GE Money initiated the "Mexican Dream Mortgage" program in five locations in late 2005, and followed it with a full commercial launch in 2006. Today, the program is available in 12 locations, including the Baja California peninsula, Cancun, and the colonial city of San Miguel de Allende. The program offers dollar-denominated adjustable-rate mortgages and fixed-rate mortgages for up to $1.5 million, although the average loan has been around $350,000. All of the credit scoring and paperwork are handled in the U.S. In Mexico, GE Money Credito Hipotecario originates the loans, and GE Capital Bank provides the Mexican bank trust for foreigners who want to buy property on the coast or near the border (foreigners are prohibited from purchasing property near the Mexican coastlines, but they can purchases long-term leases).

GE Money's move toward expanding the home mortgage market in Mexico will no doubt do two things: it will allow the real estate prices to escalate (as people buying on time with be able to pay more for their homes) and it will encourage more Americans to move to Mexico.