Spanish banks are usually stubborn when it comes to granting mortgages for private construction projects by foreign residents
.When building on Mallorca, great caution is advised if you are dependent on the necessary financial assistance!
First of all, you need to know that Spanish banks are generally very conservative when it comes to construction financing for foreign non-residents. For example, the purchase price of a property is generally not financed. And the costs for the actual construction project are also financed with a maximum of 70 percent of the estimated sum. And even that is anything but easy.
Before you can even talk to the bank about the possibilities of financing a construction project in Mallorca, you need to have all the legally required permits, expert opinions and licenses for the project as well as a thoroughly conclusive and realistic cost plan. The logic behind this: Spanish banks are always wary of approving a mortgage for a construction project that will never be completed due to legal discrepancies or an unforeseen cost increase.
When will the mortgage be paid out?
The mortgage is generally paid out after the purchase of the property, but not in the full contractually agreed amount, but in proportion to the progress of construction. As already mentioned, Spanish banks generally finance between 50 and 70 percent of the estimated construction costs.
However, this is subject to a prior appraisal in which both the current value of the project is determined as the construction progresses and the value of the property once it has been completed.
For this reason, the first thing you should do is invest in a bank appraisal. These are carried out by appraisal companies authorized by the Bank of Spain. Once this appraisal has been carried out, it is valid for six months.A personal inspection of the construction site is necessary for the expert appointment And: the expert opinion must be updated depending on the construction phase. However, you only pay a small amount for this and not the full amount of the expert opinion again.
You will need the following documents:
- Building permit from the municipality
- Receipts of all fees paid for this
- Project approval from the Chamber of Architects
- Cost estimate for the construction work
- Contract with the construction company
- Cost plan
- Excerpt from the land register and copy of the deed of purchase of the property
Further information:
Service agency Smart Servicios
