Acceptance of collateral Spain
Acceptance of collateral Spain
Spanish banks are critical of the type of property to be financed. Houses that are not habitable or are located very remote are considered insufficiently current and are often not financeable through a bank. The type of land registration also plays a major role. Mortgage opportunities are much greater with urbana properties than with rústica properties.
Spanish banks do not want to finance all houses. Only those houses that are sufficiently current in their eyes, i.e. houses that – should the (financial) need arise – can be sold again somewhat smoothly, are they willing to finance.
The Spanish local zoning plan Plan General de Ordenación Urbana establishes the type of land registration. A property located on land registered as rústica is in fact land not intended for residential development. By contrast, land registered as urbana is. Mortgage financing options for urbana properties are greater than for rústica properties.
Houses that are in such poor condition that they are not habitable will not want to be financed by a bank. Core elements of this are that, at a minimum, a house should have running water, a somewhat up-to-date electricity supply, heating, a sewer connection or functioning septic tank, a kitchen and a bathroom. If the renovations required to bring the house into a good habitable condition are co-financed then this usually overcomes the bank’s objections.
Very remote situated houses – far from a village or town – and far from “civilization” are more difficult to finance than houses that are more “in civilization. There are also certain obsolete regions where banks are more reluctant to finance than in regions with booming housing markets.
Objects such as castles, wine estates, water mills, churches converted into homes are more difficult to finance. There is a (very) small market for this type of special property and sales can take years. Houses that are very A-typical for the region can also be a problem, as can houses with a lot of land (tens of hectares). Indeed, banks are wondering if such a “non-resident buyer” is going to manage to maintain all that land.
Contributing a very large portion of your own money to a purchase increases the chances of winning over the bank to finance. But for many objects, that is often not enough either. At play here is the fact that the system of enforcing the collateral by auctioning it – as the ultimate consequence of no longer (being able to) meet monthly mortgage obligations – does not work well in Spain in all regions. After all, sometimes a house also fails to sell at auction for a sufficient amount.
Houses or properties where it is abundantly clear to a bank that they will be operated as commercial properties in the future (for example, in the tourism sector) are not financed as second homes based on existing income.
