Spanish Bank Construction Phase Financing: why it usually doesn't happen
The most common misconception among foreign new-build buyers in Spain: they count on financing that does not exist at that point. The Spanish mortgage is created at the end of the build, not at the start.
Author & regulatory separation. Content author: Siegfried Perini. Mortgage brokerage in Spain and Portugal is carried out under the §34i GewO licence held by Olga Nikushkina — BAFA-notified for Spain, in Portugal through a locally licensed intermediary. This information does not replace legal or tax advice.
Why will no Spanish bank pay the build instalments before completion?
Because at that point there is nothing to secure. A Spanish mortgage only comes into existence once the property is finished, signed off and entered in the Registro de la Propiedad — during construction the unit does not yet exist as a chargeable asset. Standard banks therefore release funds at handover, and after that the Licencia de Primera Ocupación still has to be issued: one to three months by statute, three to nine in practice. Across that whole period the buyer has to fund the developer instalments from their own resources, typically 20 to 30 per cent of the purchase price depending on the payment schedule. This, not creditworthiness, is what new-build purchases founder on. Knowing it early leaves three routes: plan the capital yourself, raise it against an unencumbered existing property, or use one of the few lenders that pay instalments directly to the developer during construction. All three belong before the private contract, not after.
Elsewhere the bank pays along. In Spain it does not.
In many countries, a bank releases the loan in line with construction progress: the buyer contributes equity first, the rest flows to the developer in instalments. The financing accompanies the build.
Spain works differently. The mortgage is created at the escritura, at the end — once the property is completed, signed off, holds its occupancy licence and is registered as a separate unit. Only then does the thing the bank can lend against actually exist.
The consequence is uncomfortable, and developer brochures rarely dwell on it: every instalment paid to the developer during construction is the buyer's own money. Not ten per cent, not twenty — the entire amount that falls due before handover.
What that means in practice
A Spanish new-build purchase typically runs on a payment plan of reservation, private contract and several construction-milestone instalments. In total, often 20 to 40 per cent of the price, spread over 18 to 36 months. On top come the purchase costs, which for a new-build consist of IVA and AJD and are not financed.
Only the balance at completion is the part a Spanish bank turns into a mortgage — for non-residents, in practice in the region of 60 to 70 per cent of the lower of price and valuation (tasación).
Anyone who has not done this calculation in advance ends up mid-build facing an instalment they cannot pay, bound by a private contract they have already signed.
Three ways to close the gap
- Own funds. The standard case. Works if the liquidity is genuinely available — and does not first have to be created by selling a property at home on a timetable that does not match the builder's.
- Raising capital against property in Germany. A German bank does not finance the Spanish property; it lends against security in Germany. The funds are freely usable and can service the developer instalments. This is the route most often overlooked — and the one that requires a §34i licence. Explained in full.
- Subrogación. The developer has taken out a loan for the project itself. At handover the buyer may take over the share attributable to their unit — but is not obliged to. What to check.
A fourth case is building on your own plot. Spain has a dedicated product for that, with staged release against construction progress — the hipoteca de autopromotor. It only applies to self-build, not to buying from a developer.
Frequently asked questions
Can I secure the financing before construction starts?
Is there bridging finance for the developer instalments?
What happens if the bank declines at completion?
Does the same apply to resale property?
More on the construction phase
Financing the instalments to the developer
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Financing the instalments to the developer →Subrogación: take over the developer's mortgage, or redeem it?
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Subrogación: take over the developer's mortgage, or redeem it? →Hipoteca de autopromotor: self-building in Spain
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Hipoteca de autopromotor: self-building in Spain →Timing: mortgage approval after 24 months of construction
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Timing: mortgage approval after 24 months of construction →New-build or resale? What actually differs
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New-build or resale? What actually differs →New-build in Spain — let us work through the construction phase together
I check which part of the price has to come from your own funds, what a German bank can raise against existing property, and what the Spanish bank takes on at completion — free of charge, no upfront cost.