Why Loan-to-Value Matters More Than Income

For a private property-backed loan in Costa Rica, the loan-to-value ratio often matters more than a traditional bank-style income package.

Loan-to-value, or LTV, compares the requested loan amount with the realistic value of the property offered as security. It helps a private lender understand the cushion between the loan and the property’s likely resale value.

Income and repayment ability still matter. A lender needs to understand how interest payments will be made and how the principal balance will be repaid at maturity. But a high salary, bank balance, or credit score does not solve a request if the property has weak access, unclear title, existing debt, poor resale demand, or a requested amount that is too high for realistic value.

GAP reviews qualified property-backed loan requests for possible placement with private lenders and may participate directly in selected opportunities. GAP does not require or pull a credit score for a normal property-backed request and works with first-lien property security only.

Private Property-Backed Financing at a Glance

• Requests generally start at US$50,000.
• GAP does not require or pull a credit score for a normal property-backed loan request.
• GAP works with first-lien property security only.
• Terms generally range from 6 months to 3 years.
• Stronger completed-property files may sometimes support around 50% loan-to-value.
• Requests around 30%–40% LTV can often be easier to structure when the property and documentation are strong.
• After GAP has a complete file and due diligence is finished, qualified loans can often close in about 10 business days.

These are practical guidelines, not promises. Each request depends on the property, title, requested amount, repayment plan, lender requirements, legal work, and signed documents.

What Is Loan-to-Value?

Loan-to-value is a percentage calculated by dividing the requested loan amount by the realistic value of the property.

For example, a borrower requesting US$200,000 against a property realistically valued at US$500,000 would be asking for a 40% LTV loan.

US$200,000 ÷ US$500,000 = 40% LTV

The lower the LTV, the more equity remains in the property after the loan is registered. That larger equity cushion can make the request more practical for a lender, especially where the property is marketable and the legal structure is clear.

It is important to use a realistic value, not simply a listing price, hoped-for future price, construction budget, or what a nearby property may have sold for several years ago. Lenders may consider location, access, current condition, title, market demand, comparable sales where available, and the time it could reasonably take to sell the property if necessary.

Why LTV Can Matter More Than Traditional Income

Private property-backed lending is different from a standard bank mortgage. A bank may rely heavily on employment history, payroll, tax returns, credit scoring, debt ratios, banking history, and long-term amortization rules.

A private lender may take a more practical view of the complete transaction. The lender still needs to understand the borrower and the repayment plan, but the property is central because it is the security for the loan.

That can be useful for retirees, self-employed borrowers, business owners, investors, foreign property owners, and people whose income comes from outside Costa Rica or through a company structure.

GAP does not require or pull a credit score. That does not mean the lender ignores risk or approves every request. It means the review focuses on whether the property, requested amount, title position, payment plan, principal repayment plan, and legal structure make practical sense together.

The Property Is Security, Not the Repayment Plan

A strong LTV is important, but it is not the only item a lender reviews. The property is the lender’s security. It should not be treated as the borrower’s only plan for paying the loan back.

The lender needs to understand:

• How interest payments will be made during the loan term.
• How the principal balance will be repaid at maturity.
• Whether a future sale, refinance, rental income, business income, outside funds, or another source supports that plan.
• What backup plan exists if the expected exit takes longer than planned.

Interest-only payments with principal due at maturity may be considered, depending on the request, lender, and signed documents. Terms generally range from 6 months to 3 years.

A future sale or refinance can be part of a repayment plan, but neither should be treated as certain. Properties can take longer to sell than expected, and a future lender may have different requirements. A renewal is never automatic. The loan needs to remain in good standing, and the same lender or a new lender must agree to any replacement arrangement.

Read why a repayment plan matters for a private loan.

What Property Issues Affect LTV?

Two properties with similar asking prices may not support the same loan amount. A lender considers more than the number on a listing page.

Important property factors can include:

• Location and realistic local buyer demand.
• Legal and practical road access.
• Condition of the home, improvements, driveway, drainage, and retaining walls.
• Water, electricity, internet, and other essential utilities.
• Title, boundaries, Plano Catastro, and known legal issues.
• Existing mortgages, liens, annotations, taxes, or other claims.
• Whether the property is completed, rentable, usable, and marketable.
• Corporate ownership records and signing authority, where applicable.

A completed, well-maintained home in a marketable area can often be easier to review than remote land, unfinished construction, a property with difficult access, or a property with uncertain title or permits.

Existing debt does not always end a request. However, GAP works with first-lien security only, so the closing structure must be able to provide the lender with the agreed first position. This may require an existing registered mortgage or lien to be paid out through the closing.

Realistic LTV Guidelines for Completed Property

There is no automatic percentage that applies to every property. However, for stronger completed homes in marketable areas, requests around 30%–40% of realistic value can often be easier to review and structure.

Some stronger files may support a higher amount, sometimes approaching 50% LTV. That depends on the complete property, title position, marketability, repayment plan, lender requirements, and legal structure.

For example, if a completed home is realistically valued at US$500,000:

• A US$150,000 request equals 30% LTV.
• A US$200,000 request equals 40% LTV.
• A US$250,000 request equals 50% LTV.

The lender does not simply choose the highest possible percentage. A lower LTV can leave more room for market changes, sales costs, legal work, existing debt, and the time needed to sell the property if a sale ever becomes necessary.

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

Vacant Land and Construction Are Reviewed More Conservatively

Vacant land is not reviewed the same way as a completed home. There is a large supply of land for sale in many parts of Costa Rica, and land can take longer to sell because it does not produce income or provide a place to live while it is being marketed.

When workable at all, raw land often supports a much lower LTV position, commonly closer to 10%–20% of realistic value. Access, water, electricity, drainage, topography, usable building area, permits, location, and resale demand all matter.

Development land can be easier to review when it has practical road access, drainage, electricity, water, buildable area, and a clear plan. Even then, future value should not be treated as completed value while construction, infrastructure, permits, connections, or a future sale remain unfinished.

How to Make Your LTV Request Stronger

A borrower cannot change every property issue, but a clear and realistic request can make a substantial difference. Helpful steps include:

• Request an amount that fits realistic current value.
• Provide a Google Maps, Waze, or WhatsApp location pin.
• Send current property photographs, including road access, entrance, driveway, exterior, and surrounding area.
• Provide the Folio Real and Plano Catastro, if available.
• Disclose existing debt, liens, annotations, unpaid taxes, or legal issues early.
• Explain whether the property is personally owned or held by a Costa Rica corporation.
• Provide corporate records and signing authority when a corporation owns the property.
• Clearly explain the requested amount and exact use of funds.
• Give a practical plan for interest payments and principal repayment.

An appraisal may be needed later, but GAP does not need an appraisal copy simply to begin a practical review. The early goal is to identify whether the property, requested amount, and transaction structure may fit before unnecessary work begins.

What Happens After the First Review?

After GAP receives useful starting information, the next step is to identify what is most important first, whether the property and requested amount may fit, and what legal or due-diligence work may be needed.

Legal fees and closing costs are considered as part of the transaction structure. GAP does not accept cash; funds move through the appropriate banking and closing process.

After GAP has a complete file and due diligence is finished, qualified property-backed loans can often close in about 10 business days. Actual timing depends on title, lender review, legal work, banking, documents, existing debt, and closing requirements. No closing date is guaranteed.

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

Frequently Asked Questions

What does loan-to-value mean for a Costa Rica property-backed loan?

Loan-to-value compares the requested loan amount with the realistic value of the property offered as security. For example, a US$200,000 request against a property worth US$500,000 equals 40% LTV.

Does GAP require a credit score?

No. GAP does not require or pull a credit score for a normal property-backed loan request. The lender still reviews the property, title, realistic value, requested amount, payment plan, repayment plan, and full legal structure.

How much can I borrow against a completed Costa Rica property?

It depends on the individual file. Requests around 30%–40% LTV can often be easier to structure for stronger completed properties. Some stronger files may support a higher amount, sometimes approaching 50% LTV. No amount is guaranteed.

Can I borrow 50% of the value of vacant land?

Usually, raw land is reviewed more conservatively. When workable at all, vacant land often supports a much lower percentage, commonly closer to 10%–20% of realistic value. Access, utilities, usable area, location, and resale demand are important.

Does a high income guarantee a private loan?

No. Income can support the payment plan, but it does not overcome a property with weak title, poor marketability, existing debt that cannot be resolved, or a requested amount that is too high for realistic value.

Can I use property owned by a Costa Rica corporation?

Possibly. The corporate records, ownership, current status, and signing authority must be clear. The property itself, title position, requested amount, and repayment plan must also work.

How long can a property-backed loan term be?

Terms generally range from 6 months to 3 years. The exact term, payment structure, and any interest-guarantee or early-release provisions depend on the lender and signed documents.

How fast can a qualified loan close?

After a complete file and due diligence, qualified loans can often close in about 10 business days. Timing varies with the property, title, lender review, legal work, banking, documents, and closing requirements.

Start With a Clear Property File

Start with the property location, estimated realistic value, requested amount, current ownership, existing debt, use of funds, interest-payment plan, and principal repayment plan.

Loan requests generally start at US$50,000. GAP reviews qualified requests from borrowers of any nationality and works with first-lien property security only.

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

This article is for general information only. It is not a loan offer, legal advice, tax advice, financial 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)