Have you ever wondered why all mortgage calculators differentiate between new and existing homes? Part of this has to do with the taxes you'll pay on the property.
The other part has to do with the mortgage. A new-build mortgage, like the Hipoteca Crea, has its own unique features compared to conventional mortgages. You'll see what they are now.
Advantages of buying a new-build home
In recent years, buying new-build homes has gained significant popularity. The high prices of used homes and the security of knowing that what you're buying is brand new have encouraged more people to take this step.
In addition to the obvious benefits, such as having a home tailored to your tastes, there are also other very interesting economic advantages:
- Save more flexibly: Unlike a traditional purchase and sale, when you buy a new-build home you can make installment payments while it's being built, giving you more time to save. Over the two or three years of construction, you'll be able to gather the money you need to complete the purchase, avoiding a large lump sum.
- Save money: By purchasing an off-plan home, you'll likely be able to avoid paying price increases that may occur during construction. If market conditions are favorable, you could save up to 20% on the home's price, as the cost remains fixed from the moment you sign the contract.
- More attractive financial terms: Developers often offer good financing terms. Often, you may be able to subrogate the developer's mortgage, which can mean a lower interest rate or better terms. A relief when applying for a mortgage!
What are the costs of applying for a mortgage for a new-build home?
Buying a home always comes with additional expenses beyond the purchase price. While it's true that the mortgage law has achieved a balance and some costs are shared between the buyer and the bank, there are still several expenses you should consider when purchasing a new-build home.
Let's break them down so you don't get caught off guard:
- Property appraisal: This is one of the first expenses you'll incur. The bank needs to verify the property's value, so you'll have to pay for an appraisal that can cost between €250 and €600. Remember that the appraisal is valid for six months.
- Origination fee: Although some lenders no longer charge this fee, you may still be charged up to 2% of the mortgage amount to open the loan.
- Notary and registry fees: As part of the purchase and sale process, you'll have to pay the fees associated with the notary, registration in the property registry, and the IAJD (Stamped Legal Acts Tax), which, fortunately, is no longer entirely your responsibility.
With all this in mind, it's recommended that you have a cushion of between 10% and 15% of the total price of the home to cover these expenses and the purchase taxes (10% VAT ). Also, don't forget that these expenses may vary depending on the autonomous community you live in, so it's always good to be well-informed.
How do new construction mortgages work?
New construction mortgages have some unique features that make them different from traditional mortgages. Although the application process remains fairly similar, there is one key difference you should be aware of: down payments.
Since this is a home that has not yet been built or is under construction, the buyer must pay a percentage of the home's price as the construction progresses. These payments are made before the home is ready for delivery. Here's how it typically works:
- Down payment and installment payments: Generally, a down payment of approximately 10% of the home's value is made upon signing the purchase agreement. Subsequently, another 10% is paid in several installments as construction progresses. Depending on the developer, these payments are usually made quarterly or semiannually.
- Higher financing percentage: Although the process is longer, it's possible to apply for a mortgage for new construction that finances a higher percentage than other types of mortgages. However, you'll need to make the first payments in advance before the mortgage comes into effect to cover the remaining balance.
- Payment schedule: Payment terms are defined by the developer and vary depending on the project. Generally speaking, you can expect to pay in stages, giving you more time to gather the necessary funds.
How to apply for a mortgage for new construction?
If you've already decided that a new-build home is what you're most interested in, the next step is applying for a mortgage. It's important to know that the mortgage application process for new construction involves certain additional procedures compared to traditional mortgages.
This is how it works:
- Purchase Agreement: From the moment you decide to reserve the property, you'll need to sign a purchase agreement outlining the down payments and the payment schedule. Generally, you'll have paid around 20% of the total price before the property is delivered.
- Construction documentation: Once the home is nearing completion, you'll need to provide documents such as the completion certificate, the first occupancy permit, or the energy efficiency certificate, which demonstrate that the home is ready to move in. By the way, do you know how to improve the energy efficiency of your home?
- Proof of income: To ensure you can afford your mortgage payments, the bank will ask you to provide proof of your income, either through your employment contract or recent bank statements that demonstrate your financial solvency.
- Simple Registry Note: This document is essential to ensure that the land on which the home is being built is free of encumbrances. The Simple Registry Note is requested from the Property Registry and contains key information about the land and any encumbrances.
When is the mortgage for a new-build apartment signed?
The mortgage signing process for a new-build home doesn't begin until the home is finished and all documents are in order. Once the work is complete, the bank will request a new appraisal of the home and verify that everything is correct before giving the final approval.
This process usually takes two to three months before the keys are handed over, so we recommend starting your mortgage search to buy and renovate your home early.
Ready for your new home?
If you're already sure that a new-build home is what you're most interested in, it's time to take action. The process may seem complicated, but with good planning and the right information, it's easier than it seems.
As always, it's best to start your mortgage search early and evaluate all available options. When you ask yourself what mortgage can I afford with my salary , you'll be more informed. Your new home is closer than you think!
