No tax on portfolio interest for foreign lenders
Congress has decided to attract foreign lenders by not taxing at all interest paid to foreign entities that qualify as portfolio interest. There are few conditions for a mortgage to qualify as portfolio interest: the portfolio has to be debt, not equity, and therefore, the mortgage has to be non contingent, there are also rules on the ownership of the foreign company, rules on how large the mortgage can be, and how much interest can be charged. These rules mean that a fair level of mortgage interest can always be applied on a property owned in the US.
An alternative to portfolio interest, is to enter a mortgage agreement with a company setup in a low tax country treaty. For instance, Japan and Ireland have interest payment taxed at 10%. In such case, a reasonable contingent interest (similar to the terms that some US lenders would propose as 40% of capital gains on sale for 60% LTV may be applied).