Mortgages for new-build properties: how they work and when to apply

A new-build mortgage finances the purchase of a newly built property, either off-plan or still under construction. Although the loan works in a similar way to one for an existing property, the timetable differs: the buyer usually pays a deposit and several instalments to the developer, whilst the mortgage is finalised near the end of construction and upon handover of the keys. The lender will normally calculate the financing based on the purchase price and the valuation, so obtaining an appropriate mortgage valuation is one of the essential steps in the process. In this article, we outline how the purchase and financing process works, when it is best to start each step, what documentation is required, how much the bank can finance and, in particular, how a property that is still under construction or off-plan is valued.

What is a new-build mortgage?

A new-build mortgage It is a mortgage loan intended to finance the purchase of a property that may be at various stages: completed and ready for handover, under construction or still off-plan. Unlike the purchase of an existing property, the process involves advance payments to the developer and a construction schedule that determines when the mortgage is finally signed. It is important to distinguish between the mortgage itself and the entire purchase process, which includes the reservation, the contract and instalment payments prior to the signing of the mortgage.

A new-build mortgage and a self-build mortgage are not the same thing

It is important not to confuse these two products:

• Mortgage for a new-build property: The buyer purchases a property from a property developer, who is responsible for carrying out the construction.
• Self-build mortgage: The owner already owns a plot of land and either commissions or supervises the construction of their home themselves.

This difference affects the way the project is financed. In a self-build, the capital can be released in stages as the work progresses. When buying from a developer, however, it is usual for the buyer’s financing to be finalised as handover approaches and the outstanding amount is due.

How does buying a new-build property work?

The process of buying a new-build property usually takes place in several successive stages, from the initial reservation through to the handover of the keys. Understanding this process helps you anticipate when the bank and the valuation come into play, and to better coordinate your payments with the developer’s timetable.

Indicative timetable:

1. Reservation → 2. Contract → 3. Instalment payments → 4. Valuation → 5. Mortgage assessment → 6. Deed of sale → 7. Handover of keys

Booking a property

The buyer usually pays an initial deposit to reserve their chosen property within the development, which normally takes that unit off the market temporarily whilst the contract is being drawn up. Before paying, it is advisable to know exactly what is being reserved, what happens to that money if the transaction does not go ahead, and when the subsequent payments will be due. It is also a good time to start doing the maths. You do not need to have a mortgage approved just yet, but you do need a realistic idea of your available savings, the taxes and costs you will have to cover, and the financing you are likely to need.

Signing of the contract of sale

Once the booking has been made, a sale and purchase agreement is usually signed with the developer, setting out the price, payment schedule, the property’s specifications and the terms of handover. Particular attention should be paid to the price, any sums already paid, the payment schedule, the property and any annexes purchased, the building specifications, the expected handover date and the consequences of any potential changes or delays. It is also advisable to check how advance payments are safeguarded. The regulations require, in the circumstances set out, that the developer guarantee – from the moment the planning permission is granted – the refund of sums paid, plus statutory interest, by means of a surety bond or joint and several guarantee if construction does not commence or is not completed within the agreed timeframe. Furthermore, these advance payments must be channelled through a special account.

Payments on account during construction

During the construction work, it is common to make instalment payments or payments on account, which are usually linked to the progress of the build or to agreed deadlines. The schedule depends on each development. There may be an initial deposit, a sum payable upon signing the contract, and various payments throughout the construction work. All of this reduces the amount remaining to be paid at the time of the deed of transfer. Keep the contracts and receipts for each amount paid. These may also form part of the documentation required later on to help the financial institution understand how the transaction has been structured.

Valuation and formal mortgage application

As the project nears completion, it is usually requested that the mortgage appraisal of the property, and the formal loan application is submitted. The bank will update its credit assessment and will need to know the value of the property that will secure the loan. This is where the mortgage valuation comes in. The Bank of Spain recommends that the valuation should not be commissioned too early in the financing process, precisely because it represents a cost to the customer and carrying it out does not guarantee that the loan will ultimately be approved. With a new-build property, there is also another practical consideration: the stage of construction may determine how the valuation should be carried out and whether it will subsequently need to be updated.

Deed, mortgage and handover of keys

The deed of sale is signed alongside the mortgage deed, at which point the keys are usually handed over. At this stage, the outstanding amount is paid to the developer as set out in the contract, the deeds are formalised, and the property is handed over. If the completion date changes, the mortgage schedule may also be adjusted. It is therefore advisable to check whether the terms previously assessed by the bank remain valid or need to be reviewed.

When should you apply for a mortgage for a new-build property?

Comparing offers and carrying out a feasibility study can begin well in advance, even whilst the property is still under construction. However, the formal application for the mortgage – and its final approval – usually takes place as the building work nears completion. The exact timing depends on each lender’s policy, the terms agreed in the contract with the developer and the actual condition of the property. Therefore, a pre-approval obtained months beforehand should not be taken as a definitive guarantee that the mortgage will be granted. During this time, your income, your debts, market conditions or the lender’s risk policy may change.

What can be done whilst the house is being built?

Although there are still several months to go before you formally apply for a mortgage, there’s plenty of work you can get on with in the meantime:

• Work out how much equity you will have available by the time of delivery.
• Work out what monthly repayment you can afford.
• Compare different mortgage offers.
• Check the payment schedule for the promotion.
• Prepare employment, tax and banking documentation.
• Find out what documentation will be available for the forthcoming valuation.
• Avoid taking on new debts without considering how they might affect your credit rating.

It is also worth comparing more than just the interest rate. The term, APR, fees, associated products, the option of early repayment and the conditions for retaining any discounts can significantly affect the final cost.

How much does the bank lend?

There is no set percentage that all lenders are obliged to finance for a new-build property. The bank will assess both the value of the property and the buyer’s ability to repay the loan, and will apply its own risk policy. For this reason, the necessary savings must be calculated before committing to the transaction.

Purchase price versus valuation

Price and valuation are not the same thing. The purchase price is the amount agreed with the developer. The valuation figure is derived from a professional valuation carried out for a specific purpose. The lender may use both figures to determine its lending limit. In practice, some transactions take the lower of the purchase price and the valuation as a reference, and then apply the relevant percentage in accordance with the bank’s policy and the customer’s profile. For example, if a bank decided to finance up to 80% of the base value it accepts for the transaction, the calculation might be:

Concept	New construction
Purchase price	300.000 €
Valuation	285.000 €
Lowest calculation basis	285.000 €
80% from that base	228.000 €

Warning: The specific percentages depend on the institution, the applicant’s profile and the nature of the transaction. This example is for illustrative purposes only and does not constitute a guaranteed financing commitment.

Is it possible to get a 100 % mortgage for a new-build property?

There may be transactions with high loan-to-value ratios, but to talk of a “100% mortgage” requires clarifying what amount the 100% refers to. Imagine a property worth 300,000 euros where the buyer has already paid 60,000 during the construction phase. By the time the deed is signed, 240,000 euros remain outstanding. A loan of 240,000 euros would cover 100% of the outstanding amount, but only 80% of the total purchase price. Financing 100% of the property’s price is a different matter altogether and will depend on the buyer’s profile, the valuation, the available collateral, any guarantee schemes and the policy of each lender. There is no general entitlement to obtain that percentage.

Valuation of a newly built property

The valuation of new-build properties has one obvious distinctive feature: the property that will ultimately serve as collateral may not yet be completed when the financing process begins. The valuation regulations expressly cover properties at the planning and construction stages and allow, where appropriate, the value to be assessed on the basis of the completed building.

Can a property be valued off-plan?

Yes, it is possible to value a property off-plan, normally on the basis of the completed building scenario; that is, valuing the property as if the construction had already been completed in accordance with the planned project. The exact scope of the report depends on the technical documentation available at the time and the purpose for which the valuation is requested. Order ECO/805/2003 defines the value on the assumption that the building is completed as the value that a property under planning, construction or renovation is expected to reach once completed, provided that it is carried out within the planned timeframe and in accordance with the specifications set out in the plans. To do this, it is necessary to have sufficient documentation to correctly identify and analyse the future property.

Valuation during construction

Once the project is underway, the assessment may include information on what has actually been built and what remains to be done. Among other things, the following may be reviewed:

• The planned project.
• The current status of implementation.
• The current stage of the works.
• An estimate of the percentage completed.
• The technical documentation available.
• Possible factors that may affect the valuation.

The ECO Order also sets out specific documentation requirements for buildings under construction that are valued on the basis of a ‘completed building’ scenario, such as the building plans, the relevant planning permission or authorisation, and the latest works certificate issued by the project management team. For this reason, valuing a property when there are still months of building work remaining and valuing it when it is practically complete need not necessarily result in exactly the same type of report or reflect the same situation.

Valuation of the completed property

Once construction has been completed, the valuation can then focus on the existing property and carry out the relevant technical and documentary checks. For a mortgage, the aim is to have a valid valuation of the asset that will serve as security. If the handover of the property is imminent and you need to submit it to a financial institution, you can request an official mortgage valuation with Gesvalt.

Necessary documentation

The documentation varies depending on the stage the development is at. This table is intended as a guide:

Condition of the property	Guidance documents
About the project	Technical specifications, plans, building specifications and administrative documentation available
Under construction	Previous documentation, licences or authorisations where applicable, and information or certificates regarding the progress of the works
Finished	Relevant land registry, cadastral, energy and technical documentation

Valuation regulations require that the necessary documents be available to correctly identify the property and set out specific requirements depending on whether it is completed, under construction or still at the planning stage. The specific documentation required may vary depending on the status of the property, the purpose of the valuation and the nature of the transaction.

Might it be necessary to update the valuation?

Yes. The fact that an assessment is carried out during the works does not necessarily mean that it will remain unchanged until handover. It may be necessary to review or update the report when:

• The construction status has changed.
• There are significant changes to the project under consideration.
• The financial institution may require further verification.
• The valuation is no longer valid for the purposes of the mortgage.

In valuations governed by the Order ECO/805/2003, Reports and certificates expire six months after their date of issue. The Bank of Spain also draws attention to this time limit when explaining the use of a valuation provided by the customer.

Requirements for obtaining a mortgage

Buying a new-build property does not change one fundamental fact: the bank needs to check that you will be able to repay the money you are applying for. The property itself serves as collateral, but the decision to grant the loan is also based on the buyer’s financial situation and the bank’s risk assessment criteria. The following aspects are usually reviewed:

• Income and job or career stability.
• Debts and other financial obligations.
• Savings available.
• Financial behaviour and track record.
• Personal and financial documents.
• Terms and conditions of sale.
• Value and characteristics of the property.
• Valuation result.

There is no debt-to-income ratio that can be presented as a legal rule applicable to all buyers. Each organisation must assess the repayment capacity for the specific transaction.

Standard documentation

The documentation is intended to answer three different questions: who is applying for the loan, what transaction they wish to finance, and which property will serve as security. In a new-build property, this final stage may require greater coordination, as the technical documentation evolves as the development progresses.

Buyer’s documentation

Depending on the profile, the organisation may request:

• Identity document.
• Proof of income.
• Tax returns, where applicable.
• Employment information.
• Bank statements.
• Documentation relating to loans and other financial obligations.

An employee and a self-employed person, for example, will not necessarily have to provide evidence of their income in the same way.

Documentation of the operation

It is a good idea to have the following to hand right from the start:

• Reservation document.
• Contract of sale.
• Evidence of the amounts paid.
• Identity and details of the developer.
• Total price.
• Payment schedule.
• Expected delivery date.

This information will enable you to check how much you have already paid, and how much you will need to finance when the deed is signed.

Technical documentation for the property

Depending on the stage of the development, the following may be relevant: the project, the plans, the specifications, the relevant planning permission or authorisation, the land registry information, and the documentation evidencing the progress and completion of the works.

For the valuation of a new-build property, The valuation firm will specify which documents are required, depending on the condition of the property and the purpose of the report.

Costs the buyer should allow for

The money needed to buy a new-build property is not limited to the difference between the price of the house and the mortgage. There are upfront payments to the developer, taxes, transaction costs and costs relating to financing. Basing your budget solely on the advertised price may mean you overlook a significant part of the cost.

Costs and taxes relating to the sale

Taxation is one of the most obvious differences between new-build and second-hand properties. As of August 2026, The Tax Agency states that the purchase of a new home subject to VAT is generally taxed at the rate of 10%. Certain social housing properties under the special scheme or publicly funded schemes may apply the 4%. Furthermore, there may be other taxes linked to the deed of sale, such as Stamp Duty where applicable, the treatment and applicable rate of which depend on current legislation and the autonomous community. It is also important to check how outbuildings, parking spaces or other items purchased alongside the property are taxed, and not to assume that any extras agreed with the developer are necessarily treated in the same way.

Mortgage loan costs

Since the introduction of Law 5/2019, the allocation of certain costs associated with taking out a mortgage has been regulated. The buyer bears the cost of the valuation. The Bank of Spain states that, in transactions subject to these regulations, the financial institution bears the costs of the notary’s fees for the loan deed, registration, administrative fees and the taxes relating to the mortgage arrangement. Notarised copies are paid for by the person requesting them. This should be distinguished from the costs and taxes associated with buying a property, which relate to the sale itself.

Cost of the valuation

The cost of the mortgage valuation is borne by the client, but there is no standard price for all properties. The cost may vary depending on the property’s characteristics, its condition, the complexity of the work involved and the necessary checks. Before commissioning the valuation, it is also advisable to consider whether the timing is right. The Bank of Spain recommends that, during the feasibility assessment, the lender should not incur this expense unnecessarily before having analysed the applicant’s ability to repay.

How does it differ from a mortgage for an existing home?

The loan may work in much the same way, but the The route to get there varies quite a lot. With new-build properties, there are various factors to consider: a development that may still be under construction, payments made months before the deed of sale, technical documentation that is still being finalised, and a handover date against which the financing must be coordinated. Taxation also differs. A new-build property purchased from a developer is normally subject to VAT, whilst the purchase of an existing property is generally subject to Property Transfer Tax. And there is an important practical difference: when you buy a completed property, you can value the existing property from the outset. When you buy off-plan, the value of the property changes during the months between the reservation and handover.

Differences between mortgages for new-build and second-hand properties

Appearance	New construction	Second-hand
Status	It may be at the planning or construction stage	Usually completed
Payments	Bookings and deliveries whilst building work is underway	Deposit and payment upon signing the deed
Appraisal	You may need a project assessment or an update	The existing property is valued
Risks	Delays, changes and future solvency	Less construction-related uncertainty
Taxation	Taxation specific to new-build homes	Taxation of second-hand properties

 

Mistakes to avoid

Buying a property that is still under construction means you have to look several months ahead. Many problems arise precisely when it is assumed that current conditions will remain the same by the handover date. Mistakes to avoid include:

• Booking without reading the terms and conditions and the returns policy.
• Confusing an initial assessment by the bank with a final approval.
• Calculate the saving based solely on the retail price.
• Assume that the organisation will cover all outstanding costs.
• Failure to verify the guarantees for the sums paid during construction.
• Ignore any potential difference between the purchase price and the valuation.
• Commissioning a valuation without first checking what documentation is available.
• Leave the mortgage assessment until the last few days before completion.

One idea sums up much of the process: Provisional approval does not guarantee that the mortgage will be granted months later, once the building work is complete.

Request a mortgage valuation for your new-build property

Is the handover of your new home coming up and do you need to submit a valuation to the bank? You can request a mortgage valuation with Gesvalt and find out what documentation you need depending on the stage of the building works. A valuation carried out at the right time enables you to ascertain the value of the property that will serve as security and to move forward with the financing process on the basis of an independent technical assessment.