It is more common for second home buyers to appeal to a Belgian bank for financing. This is perfectly possible if you have collateral in Belgium. Think, for example, of real estate, a share portfolio, group insurance or ITP. Various forms of credit are also possible: a classic loan with fixed repayments, a bullet loan, a bridging loan, etc. Finally, you can also borrow in Spain. However, there are some points it is best to take into account beforehand. In this article, you will find 3 tips when borrowing for a new building in Spain.
Tip 1: Prepare in good time
When buying a new building in Spain, the first step consists of drawing up a reservation contract. With a reservation, you take an option on the property for a certain period of time. At the end of this period, you have to pay the first contractual instalment.
However, this contractual period, or reservation period, often consists of only a few weeks. In practice, we find that many buyers only actually start the loan application after signing the reservation. However, banks need several weeks to (1) approve the loan and (2) release the funds.
Moreover, some forms of financing may require additional steps. For example, with a bridging loan, an appraiser may first come by to establish the sale value of your home. With an IPT, for example, there may be additional unexpected costs to release the money faster.
Therefore, it is best to find out about your bank's approval process. And this before you leave for Spain. To start the process, the bank will often require a reservation or purchase contract.
Tip 2: Necessary documents for release of credit
For new construction projects in Spain, we see that necessary documents are usually still missing. Especially for projects in the very early stages.
A frequently requested document by banks is the project's building permit. In Spain, works can start without an approved building permit. If your bank then requests a building permit in order to release the funds, we lose a lot of time. Therefore, it is important to be aware of what documents your bank requires for the release of funds.
Tip 3: Borrowing in Spain
Spanish banks require collateral located in Spain. You should therefore establish a mortgage on your new building. With a sale on plan, however, you can only establish a mortgage when you are the owner. And you only become owner when the deed of sale is signed, when you have already made several payments. Concretely, you can only borrow for a new building in Spain up to the amount of money you have to pay in the deed.
A simple example. You buy a new building on plan at a price of EUR 250,000 including VAT. After reservation, the first tranche is EUR 75,000. The second contractual tranche is also EUR 75,000. The balance at deed is then still EUR 100,000 + purchase costs. In practice, you can then only finance EUR 100,000 with a Spanish bank. This example leaves out VAT. One bank finances VAT, while the other considers VAT as a purchase cost.
In case of a resale, you can usually borrow 60-70% of the appraised value excluding purchase costs. Thus, in case of a sale on plan, you can only borrow the balance at deed.
Decision: borrowing for a new build in Spain
When buying new construction, it is recommended that you have at least sufficient funds to make the first contract payment. That way, you do not have to worry about the feasibility of the contractual deadlines and have enough time to put your loan in order.
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