Preferred Rate Mortgage Loans in Panama

In an effort to make homeownership more accessible for the working class, the Panamanian government has implemented and extended laws providing preferred interest rates on mortgage loans. This initiative is designed to benefit middle-class families who might not otherwise receive significant financial advantages. Let's dive into how these preferred rate mortgages work and what recent legislative changes mean for prospective homebuyers.

What are Preferred Rate Mortgages?

Preferred rate mortgages are a type of home loan where the interest rate is subsidized by the government. This means that homebuyers can secure lower interest rates than those typically offered by commercial banks, making homeownership more affordable. These rates are part of a broader effort to stimulate the housing market and support the construction industry, while also helping individuals and families buy their first homes.

Recent Legislative Changes

On September 22, 2023, President Laurentino Cortizo Cohen sanctioned a law extending the preferred interest rates that had expired in December. This law, driven by the Ministry of Housing and Land Management (Miviot) and its minister Rogelio Paredes, aims to assist the working class in acquiring affordable housing. The goal is to benefit the middle class, specifically those who typically lack substantial financial benefits.

How the Preferred Rates Work

The preferred interest rates apply to various ranges of mortgage amounts and are structured as follows:

• 4% Interest Rate:
  • For loans financing homes between 45,000 and 80,000 balboas, the 4% rate is applicable for 10 years, non-renewable.
  • For loans financing homes between 80,000 and 120,000 balboas, the 4% rate is applicable for 8 years, non-renewable.
• 2% Interest Rate:
  • For multifamily vertical housing loans between 120,000 and 150,000 balboas, the 2% rate is applicable for 5 years, non-renewable.
• 1.5% Interest Rate:
  • For multifamily vertical housing loans between 150,000 and 180,000 balboas, the 1.5% rate is applicable for 5 years, non-renewable, exclusively in the provinces of Panama and Panama Oeste.

Practical Example

To illustrate the benefits, consider if the current bank reference rate is 7%. For a loan within the first tranche (45,000 to 80,000 balboas), where the state absorbs 4%, the borrower would only pay an effective interest rate of 3%. This significant reduction makes monthly payments more manageable and overall homeownership more attainable.

Application Process

To take advantage of these preferred rates, homebuyers need to prepare and submit the required documentation, which typically includes identification documents, proof of income, bank statements, tax returns, and references. The next step is to get an appraisal of the property, which can be facilitated by the bank or through Hipotekya.

Upcoming Opportunities

From September 28 to October 1, the traditional Capac Expo Habitat housing fair will take place, where numerous housing projects will be offered. This event is an excellent opportunity for prospective buyers to explore their options and take advantage of the extended preferred rates.

Conclusion

The extension of the preferred interest rates law until December 2025 is a clear indication of the government's commitment to supporting the housing market and making homeownership more accessible. By providing substantial interest rate reductions, the law offers significant financial relief to homebuyers, especially those purchasing their first home. If you are considering buying a home in Panama, now is a great time to explore your options and benefit from these preferred rates.

For more detailed information and guidance on how to navigate the mortgage process, contact our team of experts by filling our form.

Last update: 17/07/2024