Borrower Questions

What are the loan requirements?

First of all you need equity -- your borrowing power will depend primarily on the equity that you have. Depending on the reason for the loan the remainder of our requirements vary, but they can include proof of income, other assets, outlining your use of funds, and most importantly, how you plan to pay back the loan principal.

How long can I borrow the money for?

epending on the loan type, terms can range from 6 months for some hard money loans to up to 5 years for home equity loans. However, the principal on the loan could be paid faster without penalty, reducing the total interest you pay on the loan.

What happens to my property title during the loan term?

A mortgage lien is placed on the property with the investors as loan creditors. In the case of some larger loans, Gap Investors employs a "fideicomiso de guarantía" (guarantee in trust), whereby the property title is conditionally transferred to a registered trustee.

What is the minimum and maximum that I can borrow?

The minimum loan size with Gap Investors is US $5,000, in the case of a simple consumer equity loan. The maximum loan is in the millions, so please contact us and we can discuss the details if it is a large-scale project.

What kind of interest rate should I expect to pay?

Typical interest rates charged to borrowers are between 8% and 24% per annum, although every loan is different depending on the risk, amount of collateral and duration.

Why can't I just get a bank loan?

We urge you to first apply with Costa Rican banks for a traditional mortgage. You'll find that banks are highly risk-averse and have certain collateral and income requirements for their loans, or are not lending at this time.

How do I pay the initial payments on the loan?

Depending on your income, the loan may involve a cash reserve -- in other words, the first year's interest payments are held, allowing you to concentrate fully on the use of funds.

What was the largest project you've been involved with?

We were involved with the Playa del Sol development on the Caribbean coast of Costa Rica, which is an 1,100-acre property with 3 miles of titled beachfront. The plan calls for 500 residential lots in Phase 1, with an additional 1,500 lots in later phases, along with hotels, golf course, and commercial units.

The entire project was purchased by ECI Ltd., a group of investors from the United States, which is going ahead with the development under the name Gran Caribbean.

What is Latent Value?

Latent value is the value possessed by a property which has potential for development because it is currently not employed at its highest and best use. One example is a large piece of land that was purchased long ago when it was rural and now finds itself in the middle of a fast-growing suburban community; this land is better used as a suburban housing development. Another example is an old home in a large lot purchased in the city long ago, a city which has since grown into a metropolis with skyscrapers; this land is better used as a multi-floor apartment building with commercial units on the first floor.

What is a gap or bridge loan?

In the real estate context, a gap loan, or bridge loan, is a non-traditional mortgage, secured by the property and not always by the borrower's income potential. Bridge loans are usually short in duration, providing a high Return on Investment (ROI) for lenders, while effectively creating a financing bridge from the start to the point where banks are interested, or the property's sale repays the principal.

An example of a situation requiring a bridge loan is a large undeveloped property that was inherited by a family member. The new owner would like to take advantage of the high development potential (known as latent value) by subdividing the land and building homes for sale. The owner approaches the bank for a long-term mortgage to make his dream happen but does not have the income requirements to service a fairly large bank loan. Instead, the bank may tell the owner that when the construction is underway and pre-sale contracts are provided, they'll consider a loan.

So a construction loan is required from the secondary lending market where Gap Investors comes in. The construction loan is a bridge loan with higher interest rates due to the nature of the loan, providing a bridge to the long-term bank mortgage with market interest rates.

What is a syndicated loan?

A syndicated loan is a form of loan that a group of lenders collectively extend to a single borrower. The group of lenders is known as a syndicate.

For example, for a loan of $1 million, instead of one lender providing financing for the entire loan, multiple lenders could each contribute an amount that adds up to the loan's total. 4 lenders could provide $100,000, $200,000, $300,000, and $400,000, which adds up to $1 million, allowing the borrower to acquire the financing. The returns for each lender are in proportion to the amount invested.

What are the benefits of loan syndication?

The borrowing requirements of large-scale real estate development projects are sometimes beyond the funding and credit risk capacity of a single lender. Though there is a single loan agreement, each participant to a syndicated loan maintains a separate claim on, and bears the credit risk for, the portion of the loan that it has provided. These loans enable lenders to achieve greater diversification in their loan portfolios.

What is in it for Gap Investors Ltda?

As a mortgage broker, we charge a percentage of the loan in the form of a closing cost upon the signing of the mortgage contract. Just like regular bank mortgages, this closing cost is taken out of the funds disbursed to the borrower. Our closing costs are higher than your typical bank mortgage, because they cover the costs involved in the trust guaranty, escrow fees, borrower broker fees, lender broker fees, legal costs, formation and full management of the loan holding company, loan repayment collections, accounting, reporting -- as well as our profit as mortgage brokers.

How do I get started?

You can get started by filling out our pre-application form with some basic details.