You’ve probably seen YouTube videos and blog posts explaining how inexpensive it is to live in Mexico. But if you want to buy your own place and you want that place to be in a desirable location, you should prepare yourself for sticker shock.
Don’t get me wrong: Most areas of Mexico are less expensive than most places in the United States, as promised. And I’m sure you can find properties in Mexico that cost $150,000 or so. But you won’t see prices like that in Mexico City, at least not in any of the more desirable neighborhoods.
We know this because we recently purchased a new apartment in a newly-built building in our favorite part of Mexico City, called Roma Norte. The list price was a bit north of $250,000, but after figuring in all the taxes and other fees, the final cost was closer to $280,000. That was more than we wanted to spend. More importantly, it was more money than we had. A lot more. So how on earth did can afford this purchase?
The short answer is home equity.
But the long answer involves a lifetime of home ownership with years of ups and downs, a few well-timed moves, and just basic common sense when it comes to money. Mostly on my wife’s part, since she handles our finances.
So I’ll start with the homeownership bit and explain how we got here. Not including the Mexico City apartment, we’ve owned four homes.
We purchased our first home in 1998, in Phoenix, Arizona, ahead of the birth of our first child for $99,000. We sold that home about a year and a half later, for $113,000, and moved back to the Boston area to be closer to family.
We bought our second home, a small Cape, in Dedham, Massachusetts, the town I had grown up in outside of Boston, in early 2000. It was no bigger than our first home but because of its location, it was worth over twice as much. We paid $225,000. And then we sold it for $265,000 less than two years later.
We bought our third house, also in Dedham, in early 2002 so we had enough room for our second child. This was a bigger home, a 1600 square foot Colonial, and it was on a nice curved corner lot with what felt like a lot of space for the area. We could only afford it because it was a neglected fixer-upper, and we paid $365,000 for it. And over the course of the next 15 years, we performed an incredible number of upgrades and improvements, until we finally moved in mid-2017. Thanks to the explosive real estate market in the area, we received $635,000 for the home, and we pocketed about $350,000 when all was said and done.
From there, we moved into a large family home in Lower Macungie, Pennsylvania with more land. But because of its rural location, this much nicer home cost far less than our previous one, at $365,000. It also needed upgrades and improvements because of neglect, and so we made a decision I still sort-of regret today and got a small ($50,000) mortgage with a small equity line instead of paying cash. We wanted to make a lot of improvements upfront and felt that having cash made sense.
The next thing to understand is our history with home equity. Throughout the 2000s, I was paid well and we didn’t have much debt beyond the house and shorter-term, 0 percent car loans. We had a home equity line of credit on the second Dedham home which we never needed or touched, figuring it might act as a form of emergency fund if I lost my job or there was a medical disaster.
But then the 2008 financial crisis hit. And this line of credit was suddenly taken away because so many of the bank’s customers had simply taken all the money from their own lines of credit. Inquiring about this, we were told not to worry, and that if we still qualified, we could simply reapply for the line of credit and it would be returned. And so we did so, waiting over a period of months to hear back. When we did, we were told, sorry, the bank wasn’t doing lines of credit anymore because of the ongoing crisis. The money was gone.
This bothered us on a number of levels, but mostly because we had done the right thing and not drained the line of credit just in case. And that impacted what we did years later when the COVID-19 pandemic hit in 2020. Thanks to the uncertainty and our prior experience, my wife and I decided to take $50,000 out of our equity line and put it in a cash-accessible savings account, just in case, paying hundreds of dollars in interest for the privilege.
Of course, by 2020-21, we were reevaluating things like so many others were. In our mid-50s and with our two kids in colleges we were paying for, we were a long way from retirement—whatever that even means—and had long planned for a future in which we might split our time between two places, one of which we had hoped would be international. We had spent the previous 15 years or more visiting Europe for at least a month each year, and were obviously heading in that direction. But with the pandemic preventing travel to Europe, I started researching other destinations. And discovered Mexico.
We will write more about our sudden shift to Mexico elsewhere, but the two of us visited Mexico City and some other locations in Mexico in 2021, and on the second trip, our kids joined us—in Mexico City—so we could share what we had found. We were definitely leaning in that direction by then. We just needed to find the right neighborhood.
Concurrently to this, my wife walked into my home office one day in late 2021 and jokingly mentioned that the bank that holds our equity line of credit had written to inform us we were eligible for a much higher line of credit—$300,000—than we had had at the time. This was the type of thing we’d normally ignore, and we kind of laughed it off. But sitting there, thinking about it, a thought occurred. And I told Stephanie we should apply. Who knows? Maybe we’d find a place sooner rather than later, and this line of credit would enable us to pull the trigger.
And so we did. And were approved. And in January 2022, we visited Mexico City for a third time, staying at an Airbnb in Roma Norte. We fell in love with the neighborhood and realized we had found the right place. And then, on the last day of that trip, we walked around a corner and our lives changed: the apartment that we ended up buying was having an open house. We had walked by it most days on that trip and hadn’t even realized it was for sale.
Thanks to our equity line increase, we could afford it. And we know that our current house is worth enough now that if we sold it, we would still walk away with some cash after paying off the credit line. This is not the type of risk we normally would take. But it was the right home in the right place at the almost-right time, and being able to do it now just put it over the top. Had we paid for our current home with cash, we would never have gotten a home equity line. And had we not increased the amount of that credit line, we could never have purchased this place. It simply would have been another case of what-if.
We still don’t know whether this will work out over time, of course. And we still have lots of money to spend, since the apartment is empty and needs to be furnished. There are lots of things to learn, about the bills we must pay, and when, and to whom, and how. We’re not ready to move yet and so the next few years will be interesting. But I’m glad we accepted this risk and went for it. Whatever happens, I’ll always be happy about that.