A bit of a rant perhaps but banks in Spain (and maybe everywhere) are not really very service orientated, are they? I’ve been to several banks and have spoken with the friendly person behind the first desk up to the directors of the bank. From mortgaging the land to “hipoteca autopromotor”. I’ve found one bank pro-active, service orientated, and contributing. And … the funny thing is … I can’t start the project with them!
There is no way around it. When you look at a project like this one, you need a certain amount of cash to kick it off. Either that or you already own a plot of land. We do have a bit of savings so we are able to kick-start it.
Mortgaging the land
Not every bank will give you money to buy a plot of land. Furthermore, if they are allowed to do it, they will probably give you a substantial lower percentage of the total cost price. Next to that, the mortgage percentage is probably higher than for simply buying a house. Some banks will not add the additional costs of buying a plot of land to the total price of the mortgage. An example: land costs 50.000 € excluding IVA (VAT). The bank potentially only does 50% of that 50 K. Meaning that you have to cough up the other 25 K plus the total VAT which is 10,500 €. In addition we have the other costs for getting the mortgage sorted with the bank. Things like, valuation of the land, mortgage opening, taxes, notary and admin fees. All of which generally totals up to about another 10%. So cash required: about 40.000 €. In other words, if you can do it without the bank … do it!
With certain banks there is always an option to go for the “hipoteca autopromotor”. This means that the bank will fund your land as well as building costs and when the house is officially ready with all the paperwork done, you get the official mortgage. Now this more like it!
So what do you need to get this fabulous mortgage? It was explained to me by this lovely bank employee and I went home and … looked at my notes and … still didn’t understand it 100%. So I went on the internet, again and … no … still not … mmmhhh. I put my notes in a one-pager and asked for another meeting “just to confirm a few items” i.e. please explain it to me again! And then I got it – it’s brilliant! Yes this will work for us!
To get our wonderful bank to start paying for the project costs, we only need 2 things. 1. “nota simple” of the plot of land or the papers that show that you own it and 2. the Project documentation from the architect. Ah, …. so how much will that documentation cost? mmmhhhh And how much time does the architect need to do that project documentation? Perhaps our piece of land is already sold then! It’s a circle isn’t it? OK so back to the first option than. Will this wonderful bank lend me money to buy the plot of land? No, they don’t. They only do it as a package deal.
Back to option B
So we went back to our own current friendly bank director. He actually really is a great guy. He is not pro-active, nor is he a creative thinker. I personally find he talks a lot and forgets there are always actions he should do before we meet again. So I presented him with loads of options. From re-mortgaging our current apartment to a personal loan instead of a mortgage until we sell our apartment to … renting out our apartment while building the new house and I don’t know what anymore. Oh I actually explained to him how the “hipoteca autopromotor” works as he … didn’t know. All valid ways of doing it and it all depends on your personal situation. So … when push comes to shove … “señor director” is sorting it out for us. We chose the option of doing the 50% mortgage before IVA & costs. And are now “patiently waiting” to see results from our decision.
PS: Triodos Bank (Seville office) is the pro-active, service orientated, and contributing bank. If you don’t know about them [click] “Triodos Bank is one of the world’s leading sustainable banks. Our mission is to make money work for positive social, environmental and cultural change.”