Mortgage Options for Off-Plan Property in Spain: Your Key Questions Answered

1. Can I secure a mortgage in Spain if I buy an off-plan property that will be completed next year?

Yes, you can apply for a mortgage for an off-plan property in Spain, but it's important to understand that while we can do an initial financial study now, it is not a guarantee that the bank will grant you a mortgage once the property is completed. Spanish banks adjust their risk policies according to the market situation and internal strategies, meaning there is always a risk that, by the time your property is finished, the mortgage terms may change, or the loan might not be approved at all.

2. If I get a mortgage pre-approval now, is it guaranteed that I will receive the mortgage once the house is completed in a year or more?

No, a pre-approval is not a guarantee. Spanish banks often review your financial situation closer to the completion date, and due to changes in the market or internal risk policies, they may decide not to grant the mortgage. This is a risk that must be carefully considered when buying an off-plan property.

3. Will the bank guarantee the interest rate and terms they offer me now when the property is completed?

No, banks do not guarantee current mortgage offers for future properties. Mortgage terms, including interest rates, can change based on market conditions.

4. Can I get a bridging loan to cover the down payment the developer requires for starting construction?

Currently, Spanish banks do not offer bridging loans for the down payments on off-plan properties. You will need to fund these payments independently, as no financing is typically available for this phase.

5. As a non-resident, what is the maximum amount I can finance?

As a non-resident, you can finance up to 70% of the purchase price (excluding taxes). However, if your income is in a currency other than euros, some banks may only offer you a mortgage for up to 60% of the property price, depending on their risk assessments.

6. What taxes will I pay once the house is completed?

When purchasing an off-plan property in Spain, you will need to pay VAT (IVA) at 10% of the property value, along with stamp duty (AJD), which varies between 0.5% and 1.5% depending on the region. These taxes are payable upon completion.

7. What additional fees or commissions will I pay when buying an off-plan property, and when are they due?

In addition to taxes, you will incur notary fees, land registry fees, and administrative costs. It's also common to pay for legal services, which, although not mandatory, are highly recommended. These fees typically add about 1% to 3% to the total cost and are usually due upon completion of the property purchase.

8. What is the minimum net income I need to qualify for a mortgage in Spain?

Spanish banks require that your monthly mortgage payments do not exceed 35% of your net income after taxes and expenses. Additionally, the banks assess income differently than in other countries. For example, even if you have an interest-only mortgage abroad, Spanish banks will calculate both interest and principal repayments. Variable income from bonuses or rentals is often only partially considered. You must also demonstrate consistent income for at least three years, either through employment or steady company profits if you run your own business.

9. Can I purchase the property and have the mortgage in my foreign (non-Spanish) company’s name?

No, Spanish banks do not provide mortgages to foreign companies. Mortgage loans are only available to individuals or companies registered in Spain.

10. Can I get a mortgage for more than 70% of the purchase price if I’m a non-resident?

No, under no circumstances can a non-resident obtain more than 70% financing of the purchase price (excluding taxes). Moreover, depending on your income currency, banks may limit the mortgage offer to 60%.

11. What guarantees do I have when purchasing an off-plan property to ensure my money is protected?

When purchasing an off-plan property, it’s crucial to verify that the developer provides a bank guarantee or insurance policy. This ensures that, in the event the developer goes bankrupt or fails to complete the project, you can recover the amounts paid during construction. Always ensure that you understand these guarantees before signing a contract

12. What happens if I decide not to purchase the property once it's finished? Can I get my money back?

Off-plan purchase contracts in Spain are generally strict, meaning that if you decide not to complete the purchase, you risk losing the deposits and payments made. Before committing, you should carefully review the contract terms to understand whether you have any recourse if you change your mind.

13. What are the differences in taxes and fees between buying an off-plan property and a key-ready (completed) home?

For off-plan properties, you pay VAT (IVA) at 10%, whereas for a resale or key-ready property, you pay transfer tax (ITP), which ranges from 6% to 10%, depending on the region. Additionally, off-plan purchases usually involve staged payments during construction, while key-ready homes require full payment at the time of purchase.

14. What are the advantages of buying an off-plan property versus a key-ready home?

Buying off-plan allows you to potentially benefit from lower prices during the early phases of development and offers the chance to customize certain aspects of the property. However, it involves a waiting period and carries the risk that the mortgage may not be approved upon completion. Key-ready homes, on the other hand, offer immediate availability, avoiding construction delays, but you typically have less flexibility in terms of customization.

15. Will the bank consider rental income from the property once it’s completed as part of my income?

No, in Spain, banks do not consider future rental income when assessing mortgage affordability. They operate under a conservative approach ("criterio de prudencia") and only account for current, proven income to minimize risk.