Question about spanish mortgages for new build property

[jelnet]

Hello forum folks!

I have a question about how Spanish mortgages work in relation to new build property (i.e. property that's under development).

Basically I have been told that in Spain, if you get a mortgage to build a new property, that you do not get the whole amount of the mortgage up front, but instead you get it in stages, after satisfying the mortgage lender that certain milestones of the build have been completed.

For example you get a mortgage of 100K, they give you 20K to get started. Then say in 6 months, once some "official" (maybe an architect) signs off that the foundations have been correctly laid, you get another 20K and so on until the property is built. Is this correct?

The reason I ask is that I lent someone some money towards their new build Spanish property on the proviso they were due to receive another "stage payment" from their lender and couldn't get next said payment until the current stage of work was complete (for which they needed my money). Just wanted to check if this sounds accurate.

Thanks for any help!

 

[Lysos]

Can't comment on Spain, but that's certainly the case in Portugal.

 

[jelnet]

Thanks

 

[Carolina Garcia Chagrin]

Hello, I confirm that it is accurate as you describe it, i.e. banks are lending money to developers in stages, according to the building progress which is certified by the architect who is responsible for the building. Of course this is to assure that the lended funds really go into the building and not anywhere else. The question that must arise is why the developer ran out of money without completing the necessary stage, either the financing plan was wrong, or he really did use the funds for something else? Cheers!

 

[jelnet]

Ta for your reply... I think the issue has been that the mortgage company will not release the final funds until the building gets it's hotel licence (which it should be granted soon). This is what I am told anyway.