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Benefits of Investing in Casco Viejo
- linettechu
- Aug 23, 2021
- 3 min read
Updated: Nov 10, 2023
Investing in Casco Viejo comes with attractive benefits such as special interest rates for mortgage loans and tax exemptions for decades.
For the purpose of this article we will explain two laws in Panama that provide preferential interest rates for mortgage loans.
The term preferential means the State assumes part of that interest for a certain period of time. Perhaps, the correct term is "subsidy", because the Government assumes a part of that interest for a period of time depending on one of the two laws which we will explain in this article. Therefore, the interest agreed with the bank will be lower for the debtor, because the other part is assumed by the Government.
1. Law of Preferential Interest Rate for Family Assets (Law 3 of May 20, 1985 and its amendments).
This law applies to ‘first time buyers’ of a house or apartment located in any part of the city.
The property must be declared by the owner as the main residence and family property.
The property value cannot exceed $ 180,000.
The law remains active for 10 years. After this period, the owner of the property must pay the full interest rate set by the bank at that time.
How much does the State assume with this Law?
The State assumes the entire interest for new homes priced less than $ 45,000.
If the price of the home is between $ 45,000 and $ 80,000, the State will assume 4% of the current interest for 10 years.
If the value of the house or apartment ranges between $ 80,000 and $ 120,000, the fixed interest subsidy will be 3%.
The above mentioned, applies for new houses or apartments.
This law created two new incentives specifically for apartments: 2% interest subsidy for those costing between $ 120,000 and $ 150,000 and 1.5% for those between $150,000 and $ 180,000. The subsidy for these, only apply for five years in comparison, to the subsidies for properties under $120,000 that can last for up to 10 years.
This benefit will be applicable for homes that have an occupancy permit until December 31, 2021
What determines the interest rates?
Interest rates are always variable. The percentages of the rates are determined by the Federal Reserve of the United States and they vary depending on the international market fluctuations. This is due to the fact that Panama is a dollarized market.
Rates are usually 5% +
Few banks dare to charge fixed rates for more than 10 years. And the ones that do are usually state-owned. Every quarter the Superintendency of Banks of Panama sends a report to all banks where it informs the reference rate of the local market for residential mortgage loans.
2. Law of Special Interest in Casco Viejo (Law 136 of 2013)
This law is exclusive to the area of Casco Viejo.
How much does the state cover?
The state covers 3% of the regular rate. The buyer of a property pays a minimum of 3%. If the current rate is 7%, you would pay 4%. If it was 6%, 3% would correspond to you. But if the regular rate was 5%, you would also pay 3%, since the minimum will always be 3%.
It applies to properties of any price, whether or not it is the owner's first home.
The agreement remains active for 25 years.
It applies for residential or commercial properties.
If the property you want to buy is your first home, it is located in Casco Viejo and costs less than $ 180,000, you must choose between one of the two laws. It is advised doing your calculations and deciding on the regulation that best suits you in the long term.
Here are some links if you would like to know more in detail about these laws.
Law 3 of May 20, 1985 and its amendments
Law 136 of 2013 and its amendments
For more information you can reach out to us at contact@vivecasco.com
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