I’ve been looking at new build properties recently, from choosing the area to checking out floor plans, and I feel like I’ve almost become a semi-expert. However, when it came to the mortgage part, it was a real headache. After about half a month of research, I’ve finally gotten the hang of new build mortgages, so I’m starting this thread on getting a mortgage in Spain to share my findings with fellow house-hunters. Hopefully, it can help others on the same journey, and everyone is welcome to discuss and add their own insights!
The mortgage process for a new build is quite different from that of a resale property. With a resale, you agree on a price, secure the mortgage, and complete the purchase. But with a new build, you often buy off-plan and pay in installments, which leads to two main approaches for the mortgage. Simply put, you can choose between the ‘hassle-free’ mode and the ‘do-it-yourself’ mode.
New Build Mortgages: Two Main Options
Option 1: Developer’s Mortgage Subrogation
This is the ‘hassle-free’ option. In short, the developer has already taken out a large loan from a bank to finance the construction. As a buyer, once the property is completed, you can simply ‘take over’ your portion of that loan under the terms pre-arranged between the developer and their bank.
Pros: The process is incredibly simple. The developer’s partner bank has already vetted the entire project, so their review of the buyer’s personal documents is often more relaxed, and the funds are released quickly. Sometimes, developers negotiate pretty good interest rates to promote sales.
Cons: You have no choice. The bank is pre-selected, and the interest rate, term, and bundled products are all part of a package. While the terms might be ‘pretty good,’ they may not be the best available on the market. You’re essentially giving up the right to shop around for the sake of convenience. A blessing for those who prefer convenience, but perhaps not the most optimal choice.
Option 2: Apply for a New Mortgage Yourself
This is the ‘do-it-yourself’ mode. You completely bypass the developer’s partner bank and, just as you would for a resale property, you shop around at different banks to find the best deal and apply for a brand new mortgage.
Pros: You are in complete control! You can secure the most competitive interest rates and the fewest bundled products on the market. There are many online comparison tools now that make it easy to compare fixed (FIXO) and variable (VARIABLE) rate products from various banks.
Cons: It’s time-consuming and requires effort. You’ll need to prepare a lot of documents and negotiate with each bank individually. The bank’s scrutiny of your personal financial situation will be very strict. Additionally, you will have to pay for a property valuation fee (tasación). Although the law now requires banks to cover most of the initial mortgage costs, this fee is typically paid upfront by the buyer.
| Basic Documents Required | Description |
|---|
| NIE and Passport | Proof of identity |
| Work Contract | Preferably a permanent contract (indefinido) |
| Last 3-6 months’ payslips | Proof of income |
| Last year’s income tax return | Supplemental proof of income and financial status |
| Bank statements | To assess daily cash flow and savings capacity |
| Proof of down payment funds | To prove you can cover the portion not financed by the mortgage |
A Few Personal Tips
Overall, if you’re short on time, if your personal documentation isn’t ‘perfect’, or if the developer’s offer is genuinely attractive, choosing the Subrogación is a good option. However, if you have enough time and want to maximize your financial benefit, I strongly recommend you take the time to compare offers on the open market. I ended up finding my own bank. Although the process was more troublesome, the savings on interest over 30 years will be substantial. The most important point: Regardless of which option you choose, when you pay the deposit and sign the purchase contract, make sure a lawyer reviews all the clauses, especially the one concerning what happens to your deposit if your mortgage application is denied! Wishing everyone success in finding their dream home!
