2023-09-14 06:52:44
In the world of finance and housing, there are various types of mortgages designed to fit the individual needs and circumstances of each buyer.
One of the most particular and least known options is the self-developer mortgage. In this article, we will explore what these loans are, their advantages and disadvantages, and who applies for them.
Self-promotion mortgages are a type of loan intended to finance the construction of a single-family home, a chalet or even an apartment building, where the applicant assumes the role of promoter and builder of the property.
Unlike traditional mortgages, where you purchase a property that is already built, in the case of self-developer mortgages, the process involves acquiring the land, obtaining the necessary permits, planning and supervising the construction and, finally , the delivery of the finished home.
Another of its peculiarities is that, in self-promoted mortgages, the money is delivered in three installments:
Initial or “ground” phase: When you sign the mortgage, the bank gives you approximately half of the total amount of your mortgage to start the work.
Certifications phase: As the construction progresses and the architect certifies it to the bank, more money is given to you.
End of work phase: When the technician certifies that the building has been completed, you receive a final installment of money (between 10% and 20% of the loan amount).
The repayment period for self-developed mortgages is usually a maximum of 30 years.
Self-developer mortgages are usually requested by people with experience in the construction sector or who want to have complete control over the design and construction of their home. They are also common among small construction companies that want to develop real estate projects.
However, it is not a very popular option in Spain, partly due to the complexity and risk associated with the construction of the property, as well as the requirements imposed by banking entities.
What are the requirements to contract a self-promotion loan?
In addition to meeting the usual solvency requirements necessary to apply for any mortgage loan, people who want to take out a self-promoted mortgage must:
Own developable land. Have a construction project prepared by an architect and approved by the College of Architects. Apply for a construction license at the corresponding town hall. Have an execution budget prepared by a construction company.
These are some of the main advantages of taking out a self-promoted mortgage:
Personalized design: The greatest advantage of this type of mortgage is the possibility of designing and building the home according to individual needs and tastes. This allows creating a space completely adapted to the owner’s preferences.
Greater control– By taking on the role of developer and builder, the owner has greater control over the construction process, which can result in greater care and attention to detail.
Savings potential: In some cases, building can be cheaper than buying an existing property, especially if costs are well managed and unnecessary expenses are avoided.
Not everything is benefits with self-promoted mortgages. Next, we put some drawbacks on the table:
Complexity and risk: Building a home involves a number of risks and complexities not found in purchasing an existing property. Not everyone is prepared to efficiently resolve delays and unforeseen events that may arise.
Strict requirements: As we have already mentioned, financial institutions usually impose stricter requirements for self-promoted mortgages, since the process entails more uncertainty and risk. A solid construction plan, previous experience in the sector, and approval of the corresponding plans and permits are required.
Greater work and responsibility: By becoming the developer and builder, the owner takes on a significant workload, from project management to supervising workers and coordinating suppliers.
In summary, self-developed mortgages are an unconventional option in our country, but quite attractive for those who want to have complete control over the design and construction of their home. Although they present certain challenges, they offer the possibility of creating a custom home and, in turn, saving costs.
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