Off plan Spain – construction phase financing: why won't the standard bank pay?
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.
Construction phase financing in Spain: when does the mortgage come into existence?
The Spanish mortgage comes into existence only at completion, once the property is finished, signed off and entered in the Registro de la Propiedad. That is why construction phase financing in Spain rarely comes from a Spanish bank, and why off-plan instalments are your own money. Only one of 30+ lenders pays during construction.
Elsewhere the bank pays along. In Spain only one of 30+ lenders does.
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; in Portugal through a locally licensed intermediary. This information does not replace legal or tax advice.
The mortgage only comes at completion
Construction phase financing in Spain: the mortgage only comes at completion, so off-plan instalments of often 20 to 30 per cent are your own money.
No bank commits across 24 or 36 months: An indicative review is possible. The bank only makes a binding assessment at completion.
Spanish banks do not bridge the developer instalments
The gap is closed with own funds or with security outside Spain.
Why does almost no Spanish bank provide construction phase financing before completion? Because construction phase financing in Spain has nothing to secure at that point.
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, usually three to six in practice, occasionally up to two years.
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.
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 30 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
The gap is closed with own funds, by raising capital against property in Germany, or through subrogación, where the buyer may take over the share of the developer's loan attributable to their unit at handover.
- 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. 3. 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?
An indicative review is possible and sensible. No bank gives a binding commitment across 24 or 36 months — your income situation and the market can change. The bank reassesses at completion.
Is there bridging finance for the developer instalments?
As a rule, not from Spanish banks. The gap can only be closed with own funds or with security outside Spain.
What happens if the bank declines at completion?
The private contract still obliges you to pay. Without a properly drafted financing clause, the instalments already paid may be lost. That clause belongs before the first payment, not after.
Does the same apply to resale property?
No. On a resale purchase the mortgage is created at the same moment as the transfer of ownership before the notary — a sequence most foreign buyers find familiar.
New-build in Spain — let us work through the construction phase together
We 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.
Related pages
Equity release: how do you finance developer instalments in Spain?
Equity release against German property: developer instalments in Spain are equity — raise up to 80 % of the lending value and appear as a cash buyer.
Aval bancario or seguro de caución: are your off-plan instalments protected?
Aval bancario or seguro de caución: every instalment paid to a Spanish developer must be secured from the first euro. What the law requires.
Developer mortgage subrogation: must you take it over, or can you redeem it?
Developer mortgage subrogation: at handover the buyer may take over the developer's loan share for their unit — or bring their own financing.
Building mortgage for a self-build in Spain: how does the bank pay out?
Building mortgage for a self-build in Spain: the hipoteca de autopromotor releases funds against construction progress. The plot counts as your equity.
Mortgage interest rate in Spain: when is it fixed on a new build?
Mortgage interest rate in Spain on a new build: approval comes at the end, two to three years after the private contract. Why, and how to limit the risk.
IVA tax or ITP: does a new build in Spain cost you more than a resale?
IVA tax and AJD instead of ITP, equity during the build instead of at the notary: in Spain, new-build and resale differ across the whole process.
Content by Siegfried Perini — local brand representative since 2019, active in real estate since 1992, entered in the German intermediary register (§ 11a GewO) as a person directly involved in brokerage and advice. Point of contact for German-speaking buyers in Spain and Portugal. Brokerage by Olga Nikushkina, mortgage credit intermediary under § 34i German Trade Regulation (GewO); in Portugal through a locally licensed intermediary.