Construction mortgages or self builds in Spain

Self build loans have many restrictions and an application cannot be made until the land is bought. Also project plans and licenses are available.

Construction mortgages in in Spain

Construction mortgages in Spain

Currently only a few Spanish Banks offer construction/self build mortgages in Spain. There remains a handful of lenders that will consider applications. Limitations exist when applying for a self build mortgage in Spain. If you require a mortgage in Spain for your project, a 10 year building warranty is required. Whilst not a legal necessity Spanish Banks will require that you have this in place before any funds are released.

  • All Banks in Spain will expect you to own the land outright before you apply for a mortgage in Spain. Also have planning certificates and 10 year building warranty in place
  • Lending is generally offered as a percentage of the construction or works costs. Up to 70%
  • One lender will offer up to 70% of total cost including cost of land
  • Loan can never exceed 70% of total project cost
  • Funds released can never exceed 70% of actual value at any point during construction
  • Maximum initial advance is 70% of value of land
  • All lenders retain the final 20% until the “ Finda Obra” final works certificate is available
  • Interest only during construction may be available

Spanish mortgages for development funding

During 2015 Spanish Banks started to look again at development funding. Any funding for a mortgage in Spain, will require a prime plot is owned or a right to buy is in place.

  • Pre-sales of minimum 25% need to be proved
  • Also that a well known and fiscally strong Spanish Company is being used for the construction of the development
  • Quality small to mid size urbanizations are the key focus
  • Loan to values for developments will be based on a case by case basis as will terms and conditions
  • Shareholders may be required to act as guarantors
  • Short term bridging finance is an option

For further information on availability of self builds Spanish Loans email us today

When can I apply for a self build loan in Spain

Because Banks will expect you to own the land or the property. It is therefore a good idea, to check what borrowings could be financially viable. before committing to a purchase of the land. It will not be possible to remove all the risks associated with borrowing for a construction in Spain. It is possible to minimize the risk.

  • An offer of lending is not possible until the land is owned outright
  • Planning permissions and project plans are also required
  • Applications cannot be made until licenses are in place
  • You can mitigate some of the risk by having a financial approval in place based on your individual financial status
  • However you cannot remove the risk.
  • Before buying land to build, and having plans and licenses, you cannot get a loan approval
  • Buying land to build should only be considered if a Spanish self build loan is a preference. In comparison to a requirement

We provide expert advice on self build mortgages contact us today.

How does a construction or a reform mortgage in Spain work

If you are doing a reform and the amount of funds required are a low percentage of the current value, it may be possible to draw all the funds in one go. Monies are normally released for reforms and self builds, in stages. Based on progress. The Bank specifies these stages at loan offer.

  • Because of the higher risk associated with lending to an unfinished project, you can expect to pay a higher interest rate. In comparison to a Spanish Mortgage on standard purchase, of a completed home
  • Unlike a purchase loan some short term interest only, may be an option. Up to the point the build is completed. After this loan reverts to repayment.
  • If you intend to do a reform, and want to have some cash assistance, you should apply for the loan in Spain before the works start. Any application made at a later date will be classed as an equity release. Taking back spent funds will not be possible
  • Normal arrangement costs of a Spanish Mortgage apply
  • Fees are payable at signing of the deed for the mortgage in Spain. For the full loan amount. Not just the initial drawdown