Uruguay Real Estate Loans

Uruguay Real Estate Loans

While most of the world reels from the effects of the “global financial crisis” Uruguay (so far) has escaped much of the direct damage.

Paradoxically, while much of the developed world is wringing hands and trying to figure out how to get credit flowing again, and to get the banks to start lending again, probably the single biggest reason Uruguay real estate has fared so well to this point is the lack of credit.

Credit, and real estate loans have the effect of making things appear or seem “more affordable”. However, there are some credible models coming into the public’s eye now that suggest that all credit is really doing is pulling demand forward. This continues to work until it doesn’t and then as the economy reaches a point of “peak debt” or the place where current cash flows can no longer sustain the servicing costs of the overall debt load, then something has to give.

As we’ve seen, the housing bubble collapsing in the northern countries has lead to the unwinding of some pretty spectacularly risky mortgage portfolios, where little to no down payment was needed, properties were priced based on models and appraisals were done “virtually”.

Uruguay has none of this. In fact, with a very few exceptions you will not be able to get a mortgage in Uruguay.

The exceptions are banco hipotecaria and banco republica. Both are offshoots of government programs and terms are usually very short (10 years or so) and quoted based on down payment and payments — not apr as we are used to hearing it up north. In fact, when I asked someone who had one of these loans he was utterly confused and unable to answer me when i asked him what his mortgage interest rate was.

There are some other very rare exceptions to the rule — such as “loans” given to people who buy pre construction. However, this is a misnomer because technically they are the ones funding the construction in a pay as you go format. In another example private lenders will pool money and loan on real estate however the terms are usually 5 years or less with large balloon payments due.

In short, the real estate game is a cash market. While this helps the region whether downturns or outright freezes in lending it also means you can expect a much longer “haul” if you need to sell down the road. Keep this in mind.