Risks and Rewards of Hard Money Loans in Costa Rica

Hard money loans in Costa Rica can be useful when qualifying real estate supports a clear short-term financing request. They can also create serious problems when the property, title, requested amount, payment plan, or principal-repayment plan has not been reviewed realistically.

GAP reviews qualified property-backed financing requests starting at US$50,000 from borrowers of any nationality. GAP does not require or pull a credit score for a normal property-backed loan request and uses first-lien property security only.

• Requests starting at US$50,000
• Borrowers of any nationality may be reviewed
• GAP does not require or pull a credit score
• First-lien property security only
• Terms generally range from six months to three years
• Thirty to forty percent LTV can often be easier to structure for stronger completed properties
• Some stronger files may approach fifty percent LTV, depending on the complete file
• After a complete file and due diligence, qualified loans can often close in about two weeks

Every request is reviewed individually. Sending information does not create an approval, funding commitment, rate, loan amount, term, or closing date.

What Is a Hard Money Loan?

“Hard money loan” is a term often used for private financing secured by real estate. In Costa Rica, it normally refers to a defined, short-term property-backed loan rather than a long-term bank mortgage or revolving line of credit.

The lender looks at whether the property can serve as reliable security and whether the borrower has a realistic plan to make agreed payments and repay the principal balance at maturity.

GAP works with private lenders and may participate directly in selected opportunities. Each request is reviewed on its own facts.

Potential Benefits of Property-Backed Private Financing

For the right situation, private property-backed financing may offer practical advantages over waiting for a conventional bank loan.

• A defined loan request can be reviewed without requiring a Costa Rica credit score
• Qualified borrowers of any nationality may be reviewed
• A workable request may move more quickly once the file is complete and due diligence is finished
• The loan can be structured around a documented short-term purpose and repayment plan
• Existing registered debt may sometimes be addressed through the proper first-lien closing structure
• Property owners may be able to access capital without selling a qualifying property immediately

Those points do not make a private loan automatic or suitable for every owner. The property, legal position, loan amount, costs, payments, and maturity plan still need to make sense together.

The Main Risks to Understand Before Borrowing

A private loan secured by real estate is a serious legal and financial commitment. The property is security for the loan.

Before moving forward, a borrower should understand:

• The agreed payment amount, payment dates, and maturity date
• How the principal balance will be repaid at maturity
• Interest, legal fees, closing costs, and other documented transaction costs
• Early-repayment provisions in the signed loan documents
• What happens if payments are missed or the loan is not repaid as agreed
• Whether an existing mortgage, lien, annotation, tax balance, or other registered issue must be resolved at closing
• Whether a future sale, refinance, or outside source of funds is genuinely realistic

A future sale or refinance can be part of a repayment plan, but neither should be assumed. A loan renewal is not automatic, and another lender may not replace the loan at maturity.

The Property Is Security, Not the Repayment Plan

Owning a property with equity does not, by itself, make a loan request workable. A lender needs to understand two separate things:

• How agreed payments will be made during the loan term
• How the principal balance will be repaid at maturity

A repayment plan may involve established business income, documented rental income, the sale of another asset, expected investment liquidity, a realistic refinance plan, or another documented source of funds.

A vague plan to “sell the property later” is usually not enough on its own. The lender needs to understand the property’s realistic marketability, likely timing, and whether the proposed sale would leave enough proceeds to repay the loan and closing obligations.

Read why your repayment plan matters for a private loan.

How Much Can You Borrow Against Costa Rica Property?

Private lenders compare the requested loan amount with the property’s realistic current value. This is called loan-to-value, or LTV.

For example, a US$200,000 request against a property realistically valued at US$500,000 equals 40% LTV.

US$200,000 ÷ US$500,000 = 40% LTV

For stronger completed homes in marketable locations, requests around 30%–40% of realistic value can often be easier to structure. Some stronger files may sometimes support an amount approaching 50% LTV, depending on the complete property file, title position, repayment plan, lender requirements, and legal structure.

No LTV amount is guaranteed. A listing price, prior purchase price, construction cost, insured value, or hoped-for future sale price is not automatically the value a lender will use.

Raw or vacant land is reviewed more cautiously. It is not normally treated like a completed home for LTV purposes, and workable requests may be much lower depending on location, access, utilities, usable area, title, and marketability.

Read what loan-to-value means in Costa Rica.

First-Lien Security Is Required

GAP uses first-lien property security only. Before a request can move toward closing, the ownership and legal position of the property need to be understood.

An existing mortgage, private loan, lien, annotation, unpaid tax balance, or another registered issue does not automatically rule out a request. However, the current balance, payoff requirements, and closing structure need to be clear early.

In some situations, existing registered debt must be paid through the proper closing process before a new lender can register in the required first position.

If a corporation owns the property, the lender and closing attorney or notary will need to review the relevant corporate records and signing authority.

What Property Risks Can Affect a Loan Request?

A lender reviews more than the fact that a borrower owns real estate. The property needs realistic value, practical marketability, workable access, and a title position that can support first-lien security.

The review may include:

• Location, road access, driveway, condition, drainage, utilities, and marketability
• Ownership, title, corporate authority where relevant, and registered issues
• Existing mortgages, private loans, liens, annotations, unpaid taxes, or legal concerns
• Recorded easements, rights of way, utility rights, and neighboring-use issues
• Whether the property is completed, unfinished, specialized, remote, raw land, or income-producing
• Realistic value support from comparable sales, purchase information, or an appraisal when needed

Completed, well-maintained homes in marketable locations can often be easier to review. Raw land, very remote property, unfinished construction, specialized buildings, or property with unanswered access, water, drainage, permit, or utility questions may be harder to structure.

GAP Does Not Require or Pull a Credit Score

GAP does not require or pull a credit score for a normal property-backed loan request. This can be relevant for foreign property owners who do not have a Costa Rica credit history.

That does not make the review casual. The property, title position, requested amount, realistic value, payment plan, principal-repayment plan, legal work, and lender requirements still need to work.

Can Foreigners Apply?

Yes. GAP reviews qualified property-backed financing requests from borrowers of any nationality. Costa Rican citizenship, permanent residency, a local guarantor, and a Costa Rica credit score are not automatic requirements simply to have a request reviewed.

The property, title position, requested amount, realistic value, payment plan, principal-repayment plan, and complete supporting file still need to work.

How Long Are Hard Money Loan Terms?

Terms generally range from six months to three years. Payment structure, maturity, interest, legal fees, closing costs, and early-repayment provisions depend on the lender and signed loan documents.

Any early repayment should be reviewed against the signed loan documents and applicable published interest-guarantee guidelines.

How Quickly Can a Qualified Loan Close?

After GAP has a complete file and due diligence is finished, qualified loans can often close in about two weeks.

Timing depends on title, lender review, legal work, banking, documents, existing debt, and closing requirements. No closing date is guaranteed.

What Helps Start the Review?

You do not need every document perfectly organized before the first conversation. Start with enough clear information for GAP to understand the property and requested financing.

• A Google Maps, Waze, or WhatsApp location pin
• Current photographs of the property, road access, driveway, and surrounding area
• A Folio Real and Plano Catastro, if available
• The requested loan amount and exact use of funds
• Realistic value support, appraisal information, purchase information, or comparable properties
• Details of any existing mortgage, lien, annotation, tax balance, or legal concern
• Corporate records and signing authority if a corporation owns the property
• A clear payment plan and principal-repayment plan

Lawsen Tellier, Director of Operations, can help explain what is most important first and what can be gathered as the review develops.

Start your loan request here. You can also contact GAP through WhatsApp at +506 4001 6413.

Frequently Asked Questions

What is a hard money loan in Costa Rica?

The term commonly describes short-term private financing secured by property. GAP reviews qualified property-backed loan requests based on the individual property, title position, requested amount, realistic value, repayment plan, and complete file.

Are hard money loans risky?

They can be, because the property is security for the loan. Borrowers should understand the payment obligations, principal-repayment plan, maturity date, costs, early-repayment provisions, and consequences of not meeting the signed loan terms.

Does GAP require or pull a credit score?

No. GAP does not require or pull a credit score for a normal property-backed loan request. Each request is reviewed individually based on the property, title, requested amount, repayment plan, and complete file.

Can foreigners apply for property-backed financing?

Yes. GAP reviews qualified requests from borrowers of any nationality. Permanent residency, Costa Rican citizenship, and a local guarantor are not automatic requirements.

How much can I borrow against Costa Rica property?

For stronger completed homes in marketable locations, requests around 30%–40% of realistic value can often be easier to structure. Some stronger files may sometimes support an amount approaching 50% LTV. No amount is guaranteed.

Can a property with an existing mortgage be used as collateral?

Possibly. GAP uses first-lien property security only. Existing debt does not automatically rule out a request if the proper first-lien closing structure can be arranged.

How long are property-backed loan terms?

Terms generally range from six months to three years. The final structure depends on the lender and signed loan documents.

How quickly can a qualified loan close?

After GAP has a complete file and due diligence is finished, qualified loans can often close in about two weeks. Timing depends on the full file and closing requirements. No closing date is guaranteed.

This article is for general information only. It is not a loan offer, legal advice, financial advice, tax advice, real estate advice, or a promise of financing. Loan availability, loan amounts, rates, terms, costs, and closing timing depend on the individual property, borrower file, lender requirements, due diligence, and signed documents.

Article by Glenn Tellier (Founder of CRIE and Grupo Gap)