Live in a home that you own, independently, and possibly away from the hustle and bustle of the city. This desire, to leave behind contact with the crowds that live in large cities, has grown stronger since the start of the health emergency caused by the covid pandemic. However, if instead of acquiring an old house you prefer to build a new one, in many cases the savings are not enough for the land and the building. Therefore, there is a peculiar class of loans whose guarantee is not a house already built, as in mortgages to use, but a house of which only the project exists. It is the so-called self-promoting mortgage, a niche product whose trend, however, is on the rise, according to experts.
“The demand for self-promoting mortgages is much lower than that of a conventional mortgage loan,” says iAhorro’s Mortgage Director, Simone Colombelli. These represent only a small part of the mortgages contracted through this bank comparator. However, for the secretary of the General Council of real estate agents (Coapi), Lola Alcover, “in the last year an increase in demand has been observed, undoubtedly closely linked to the increase in interest in single-family homes that the current health crisis, with all that it has entailed, has meant ”.
But, what are the requirements to request a self-promoting mortgage? Beyond showing the financial solvency required by the bank to grant a loan, the user must be the owner of the land on which they plan to build their home and this must be registered in the Property Registry. “The land must also comply with all the urban regulations that are applicable in each specific case and have the building license, processed before the town hall,” explains Alcover. And you will have to provide a project for the execution of the work carried out by a competent technician and with the collegiate visa, as well as a budget.
“In the vast majority of cases, with a self-promoting mortgage you can get the same level of financing as in a regular mortgage loan, that is, up to 80%,” says Colombelli. That money, however, will not be delivered all at the beginning, but in a staggered manner. The usual thing is that the first contribution occurs at the time of signing the mortgage and before starting the work, and that this covers 50% of what is established in the contract. “This money will be used to pay for all the costs of purchasing materials and starting the construction,” explains Alcover.
Each time the successive stages of the building are finished, the technical director will issue the corresponding work certifications, which will be transferred to the entity to prove the completion of one of the sections. In this way, the user will receive from the bank the money planned for the next phase. When the execution of the project is finished and the certificates are issued, as well as the habitability certificate, the last tranche of financing will arrive, which generally ranges between 10% and 20%.
Regarding the other characteristics of self-promoting mortgages – marketed, among other entities, by Banco Sabadell, Bankinter, Liberbank, Unicaja, Globalcaja, Targobank and Banca Pueyo – Colombelli highlights that they are very similar to current mortgage loans. “In the vast majority of cases, the links are usually the basic ones: payroll, life insurance and home. The most frequent term is usually 30 years and the interests are similar to those of the rest of mortgages ”, says Colombelli.
“There are also many firms that set a slightly higher interest, considering that the risk assumed is higher than in the traditional format, since they are talking about a building in the future, with the consequent uncertainty of whether to final will have or not with the guarantee of the property. However, when this increase occurs, it moves in a range that does not usually exceed half or three-quarters of a point, ”Alcover warns.
Colombelli emphasizes that, when requesting a self-promoting mortgage, “the land must be purchased, except in the case of Banca Pueyo, which offers to cover up to 70% of its price, and Unicaja and Targobank, which grant up to 50% % “.
The experts consulted agree on the advantages of this type of loan. “We have the flexibility to define the project and, even, for the loan conditions with an entity that does not have a specific range of this product”, points out Colombelli, from iAhorro. To which Alcover, from Coapi, adds the fact that “the amounts are received in stages and, therefore, the indebtedness goes hand in hand with the good evolution of the defined company; and that during the first two years no capital is amortized, only the fixed interests, which makes the start of the project more affordable ”.
However, some inconvenience must be taken into account. “If we take into account all the setbacks that may arise throughout the process, such as unexpected material changes or delays in the work, among others, and not having a closed budget, it is possible that the process is expensive and occurs a deviation between the project and the finished work; and it is on the latter that the appraisal is carried out ”, advises Colombelli. To balance the uncertainty that this generates, “the entity will be more rigorous in the required solvency conditions and it is very common that guarantees are requested to reinforce the guarantee, which is another disadvantage to take into account”, Alcover emphasizes.