Dollar Mortgages vs. Peso Mortgages: Which Should You Choose?

That Morning in Medellín: An Expat’s First Brush with Mortgages

It was 7:00 a.m. in Medellín, and the sun was already washing over the red-brick buildings of El Poblado. I was sipping a tinto (that tiny, potent Colombian coffee) when my realtor, Carolina, slid a pile of papers across the café table. Right on top was a loan estimate labeled “Hipoteca en dólares.” My eyebrow shot up. I had expected to see a straightforward hipoteca in Colombian pesos, but there it was: a dollar mortgage. Carolina, sensing my confusion, explained that many foreign buyers opt for loans denominated in U.S. dollars to sidestep peso volatility. That was the first time I realized that how you borrow—dollars or local currency—can be as important as what you buy.

Before We Compare, What Is a Mortgage / Hipoteca?

A mortgage in English—or hipoteca in both Spanish and Portuguese—is a long-term loan secured by real estate. The property acts as collateral, which means the bank can seize it if you default. In practical expat terms, a mortgage is the bridge between your tropical beachfront dream and the keys in your hand. Latin American banks frequently quote

interest rates (tasa de interés in Spanish, taxa de juros in Portuguese) on a “per annum” basis. They may also reference the CETES rate in Mexico or the CDI rate in Brazil, local benchmarks that influence how expensive your loan becomes over time.

Dollar Mortgages vs. Peso Mortgages—The Core Difference

A dollar mortgage is denominated in U.S. currency. You borrow, repay, and track your balance in dollars. A peso mortgage (or a real-denominated mortgage in Brazil) is tied to the local currency. On paper, the mechanics of amortization are identical: principal, interest, a repayment schedule. But in real life, currency fluctuations, local inflation, and central-bank policy transform that paper similarity into two very different financial experiences.

How Latin American Banking Culture Shapes Your Financing Choices

Every time I use the word financing with bankers in Mexico City, they nod enthusiastically but immediately probe my income sources: U.S. 1099s, Colombian rental receipts, Brazilian dividend statements. Banks here want to know if your cash flow matches the denomination of the loan. If your income is in dollars, they prefer—perhaps insist—that your financing also be in dollars to minimize their perceived risk. Conversely, if you receive your paycheck in pesos, a peso mortgage seems a better currency match.

Culturally, Latin American lenders are conservative. They do not hand out 90-plus-percent loan-to-value ratios like some U.S. institutions did pre-2008. Mexican banks cap at 80 %, while Colombian lenders hover around 70 %. Understanding local risk-aversion is crucial because it influences down-payment requirements, closing costs (gastos de cierre), and even the speed of approval. The local banking culture is part of the financing ecosystem, silently nudging you toward a currency choice that aligns with how they evaluate risk.

The Language of Lending: A Quick Reference

Crunching the Numbers: Real-Life Examples from Mexico and Brazil

Let’s imagine two condos, each valued at the local equivalent of US $250,000. One is in Tulum, Mexico; the other in Florianópolis, Brazil.

Tulum Scenario (Peso Mortgage): Banorte offers me a 9 % fixed interest rate (tasa fija) for 15 years. Monthly payments come out to roughly MXN 41,000. With the peso appreciating last year, that payment in dollar terms went from US $1,950 to US $2,150—painful if my salary stays in dollars. But if my rental income is in pesos, that variability is a non-issue. The local rental market adjusts rents each year based on inflation, which has hovered around 5 % in Mexico, cushioning my cash flow.

Florianópolis Scenario (Dollar Mortgage): A Brazilian subsidiary of a U.S. bank offers me a 6 % APR dollar mortgage—attractive, until you realize Brazilian inflation (IPCA) fluctuates between 3 % and 10 %. My payment is US $2,100, fixed. When the real depreciated from 5.2 to 5.6 per dollar, that loan suddenly cost the equivalent of BRL 11,760 per month instead of 10,920—a 7.7 % uptick for my Brazilian tenants who pay rent in reais. I had to compromise: keep rents competitive and swallow part of the exchange loss.

These examples highlight a golden rule of financing: Match the currency of your debt to the currency of your income—unless you’re deliberately speculating on exchange movements.

Regulatory Hurdles and Paperwork

Mexico requires a RFC tax ID, Brazil demands a CPF, and Colombia wants a local credit history (historial crediticio). The documents may feel repetitive—bank statements, utility bills, and sometimes even a notarized letter from your landlord—but each country’s regulators have their own philosophy on consumer protection. Meanwhile, dollar loans usually arrive via international branches subject to U.S. banking compliance. That dual oversight can add layers of due diligence, lengthening your approval timeline. In my experience, dollar-denominated financing in Mexico took three months; a peso mortgage only five weeks.

Credit History and Crédito in Two Countries

When I first applied for a peso mortgage in Mexico City, my U.S. credit score of 780 barely mattered. The bank wanted proof of local credit cards (tarjetas de crédito) and utility bills with my name on them. Building that paper trail is easier than it sounds: open a Mexican bank account, get a low-limit credit card, pay it off, and keep the statements. The same logic works in Brazil—open a basic checking account (conta corrente), request a modest limit on a cartão de crédito, and slowly scale up. Local credit scores feed directly into whether your financing application sails or sinks.

When a Dollar Mortgage Makes Sense

My buddy Mark, who gets paid entirely in U.S. dollars as a remote software engineer, bought a two-bedroom in Bogotá with a dollar mortgage at 5.8 % fixed. His rental guests—from Florida retirees to German digital nomads—pay him in dollars through Airbnb. For Mark, exchange risk is negligible; revenue and debt move in lockstep. Plus, dollar loans often have lower interest rates because they bypass local inflation premiums.

There’s also the ROI angle. If Colombia’s peso depreciates, Mark’s property cost in dollar terms shrinks, but his rent (still collected in dollars) holds steady. That dynamic can juice returns on investment (retorno de inversión) beyond what a peso loan could deliver. Yet this benefit disappears if your income is peso-based; then you’re basically gambling against your own buying power.

When a Peso Mortgage Shines

After living three years in Mexico, my salary from consulting local startups is now paid in pesos. I chose a peso mortgage with a 7-year adjustable interest rate capped at 10.5 %. Inflation in Mexico has moderated, and my clients adjust my fees yearly. That alignment means my mortgage payment tracks my earnings. If the peso weakens, my mortgage payment stays constant in pesos, but its dollar value falls—helpful when I remit money to the States for other investments. A peso loan also eases tax filing; interest deductions tie neatly into my Mexican tax return (declaración anual).

Cultural Nuances: Payments over Cafecito

Latin America runs on relationships. When I walked into Banco de Bogotá to negotiate pre-payment penalties (penalidades de prepago), the branch manager brought out tinto and cookies. We talked fútbol first, numbers second. This social lubricant isn’t fluff—it’s strategic. Colombian banks often reduce fees for customers they trust. I’ve slashed half a percentage point off my interest rate by repeatedly showing up in person. Understanding these cultural subtleties makes your financing experience smoother—and sometimes cheaper—whether you’re dealing in dollars or pesos.

Choosing Your Currency: A Decision Framework

1. Identify the currency of your primary income stream.
2. Evaluate rental income currency if the property is an investment.
3. Compare fixed versus variable rates across both loan types.
4. Stress-test your budget at +20 % exchange-rate swings.
5. Factor in local inflation projections.
6. Consider tax implications in both countries.
7. Ask yourself: do you want to speculate on currency, or sleep peacefully?

Follow these steps and say the word financing to any Latin banker; you’ll see their face relax because you’re speaking their language—methodical, numbers-oriented, responsible.

Final Thoughts: James’s Path to Balanced Borrowing

I’ve carried both kinds of mortgages, sometimes simultaneously. My Caribbean condo in the Dominican Republic rides on a dollar mortgage; my Mexican townhouse rests on a peso loan. They mirror my income streams: remote work in dollars, local consulting in pesos. Managing both keeps me diversified but requires disciplined tracking of interest rates, exchange movements, and market rents. Over the years, I’ve learned that the best financing is not necessarily the cheapest on day one. It’s the loan that aligns with the rhythm of your life, your income, and your long-term goals as an expat.

If the local cafecito tastes sweeter when the peso drops, or if your heart rate spikes every time the real slips another notch against the dollar, let those feelings guide your decision. Currency isn’t just numbers on a screen; it shapes your daily mood. For me, choosing between a dollar mortgage and a peso mortgage always comes down to balance—financial, emotional, and cultural. And that balance is the secret sauce of thriving as an international investor.

Happy house-hunting, and may your mortgage—whether hipoteca in pesos or dollars—open more doors than it ever closes.

Until the next adventure,
James