At Spectrum Mortgages in Spain, we experience an increasing amount of enquiries regarding building a house in Spain. This is an interesting option from an investment perspective but the mortgage for this type of project works quite differently than a normal mortgage. In this article, we have outlined how the mortgage process works when building your own home in Spain.
The dream of many people is to build their own home in Spain. This dream can be expensive and therefore financing is often required. How does that work in Spain though and what do you have to look out for? Is there a specific Spanish mortgage for a new build
The process of building your own house is called “autopromocion” in Spanish and quite a few, although not all Spanish banks, will actually finance the project by offering a 50% mortgage on the plot of land and thereafter up to 70% of the building costs as a non-resident and up to 80% as resident.
It sounds quite straightforward and depending on how big of a planner you are, this is also the case. Achieving finance for an “autopromocion” is possible as long as you are well prepared. The banks will need the building permit, budget and architect drawings to be done and presented to them before approving a mortgage with this purpose.
One of the issues that many people experience when building themselves is the taxes and fees involved to get to a stage where the banks will offer finance. The documentation burden is significant and the money spent before you have an approval from the bank is also considerable. That is why it is a good idea to speak to Spectrum Mortgages about your project to get a better idea of what possibilities you have, before biting off more than you can chew.
Once the city hall has approved of your project and budget and you have paid the taxes involved with this approval, you should have created a situation that the banks can approve. The process is then that they give you 50% of the plot of land (that has the building permits, the project etc.). After that, you need to be able to start the building out of your own pocket (or through the 50% that has been provided). Hereafter the loan works as staged payments where you get e.g. the first 30% after the foundation has been laid – the staged payments are paid upon approval of the invoices that you provide along the way to prove all your building related expenses. Then another 30% once the next agreed stage has been reached and finally the remaining 20% (in case you are resident) adding up to a total of 80% of the building costs + 50% on the plot. Once you have received the total agreed amount, the project should be finished or at least you should be able to finish the project for the money you have available. Normally the banks will not approve of the project in the first place if they are not sure that you can see the project through.
Should you be interested in hearing more about “autopromociones” feel free to contact Spectrum Mortgages and set up a meeting. We are happy to help, provide feedback and guide you in the right direction if you are walking around with a dream of building you own home in Spain.
By Christian Severinsen – managing partner at SIM Spain
E: Christian.firstname.lastname@example.org M: +34-695289181