The Financial Health of Mexican Mortgage Loans
Abstract
When building a family patrimony, obtaining a mortgage loan takes great responsibility and a previous analysis. Mortgage borrowers should be very clear about the conditions and factors that influence the approval or rejection decisions of private mortgage lenders, such as banking institutions, or public ones; for example, in Mexico, the Fondo Nacional de la Vivienda para los Trabajadores (INFONAVIT) and the Fondo de la Vivienda del Instituto de Seguridad y Servicios Sociales de los Trabajadores del Estado (FOVISSSTE). The main risk is that customers may not be able to pay the periodic interest rate due to their low income. This article aims to examine the financial health of (public and private) Mexican mortgage loans based on a market analysis conducted using real data of 2015. Adopting a quantitative experimental approach, this study implemented a methodology of amortization with periodic monthly installments. The main finding was revealed by empirical evidence, which showed that lower-middle income borrowers may be at a great risk of missing their mortgage payments because their monthly income ranges from MXN $2,103 to MXN $6,309. For this reason, the goal of this article is to raise the awareness of this type of customers about the risk factors they should consider when they request a mortgage loan. In conclusion, in only four of the scenarios analyzed in this article, where the total interest to be paid is under 50% the property value, customers should devote MXN $10,000 to the pay the mortgage. As of March 2015, this amount would be approximately 4.75 times the minimum monthly wage in Mexico’s Federal District.
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