Construction mortgages or self builds in Spain

Self-build loans are more complex than straightforward purchase mortgages. A formal application can’t be made until the land is bought, and project plans and licences are in place — which means you’ll need to cover some significant upfront costs before you can secure borrowing.

We can help mitigate that risk by checking your personal financial status against the criteria Spanish banks apply, giving you a clear picture before you commit.

Self build loans in Spain

How Much You Can Borrow for a Self-Build

Very few Spanish banks offer construction or self-build mortgages, and specific requirements apply. Before applying, you’ll need to own the land outright, and have planning certificates and a 10-year building warranty in place. The warranty isn’t a legal requirement to build, but you’ll need it in place if you want to sell the property within 10 years of construction — and banks will expect it before releasing any funds regardless.

  • The maximum loan-to-value is 70% of the actual construction cost
  • Funds are released in stages as building progresses
  • The final 20% is held back until the Fin de Obra (final works certificate) is issued
  • One lender will offer up to 70% of the total project cost — including the cost of the land already paid for — provided this doesn’t exceed 70% of the property’s value once built

Interest-only payments during construction may be available, agreed on a case-by-case basis.

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

Development Funding for Spanish Property

Spanish banks began looking again at development funding in 2015. Any funding for this type of project requires a prime plot to be owned outright, or a right to buy already in place.

  • A minimum 25% pre-sales rate needs to be proven
  • Construction must be carried out by a well-known, fiscally strong Spanish company
  • The 10 year building warranty Seguro Decenal is in place
  • Quality small to mid-size urbanisations 1 to 10 properties are the key focus
  • Loan-to-value and terms are assessed on a case-by-case basis
  • Shareholders may be required to act as guarantors

Shorter-term bridging finance is also an option, though it’s normally better suited to large refurbishments than new developments.

For more information on self-build loans, development funding, or refurbishments, email us today — we provide expert advice and will help you navigate the complexities of this type of lending.

When Can I Apply for a Self-Build Loan in Spain?

Spanish banks won’t offer lending until the land is owned outright, and several other requirements must be in place before an application can be submitted:

  • The land must be owned outright before any offer of lending is possible
  • Planning permission must be granted
  • A 10-year building warranty must be arranged
  • Full project plans must be in place

Because of this, it’s important to seek professional advice before committing to a land purchase. It’s not possible to remove all the risk associated with borrowing for a construction project in Spain — but it is possible to minimise it.

If you’re considering a self-build project, we can advise you on the safest way forward. While we can’t submit an application until you own the land, we can check that your financial status meets bank criteria in advance — so you know where you stand before you commit.

We always advise clients that buying land should only go ahead if a Spanish self-build loan is a genuine preference — not a requirement. If borrowing turns out not to be viable, you shouldn’t be locked into a land purchase because of it.

How Does a Construction or a Reform Mortgage in Spain Work ?

If the funds required for a reform are a low percentage of the property’s current value, it may be possible to draw all the funds in one go. Otherwise, money for reforms and self-builds is normally released in stages based on progress, with the bank specifying these stages at loan offer.

  • Expect a higher interest rate than a standard resale purchase mortgage, due to the higher risk of lending on an unfinished project
  • Unlike a purchase loan, short-term interest-only payments may be available until the build is completed, after which the loan reverts to repayment
  • Apply before work starts — applications made after work has begun are classed as equity release, and releasing funds already spent is normally not possible
  • Mortgage arrangement costs of 1.5% to 2% apply

Arrangement fees are payable at signing of the deed, based on the full loan amount rather than the initial drawdown.