Build your own home and finance it
If you are thinking of building a house to your own taste, whether it is your future primary residence or a second home, you can rely on a specific financial product for this purpose: the self-build mortgage loan. It is similar to the traditional mortgage, but has some particularities that you should take into consideration:
- Firstly, you need to have a plot of land of your own on which to build. It is very unusual for a bank to finance the acquisition of the plot as well.
- The bank will ask you for the building project approved by the corresponding Architects' Association and the municipal planning permission.
- The bank will not give you the amount granted all at once. You will have access to the funds as the work progresses. Generally, the money is handed over as follows: the bank will release an initial payment to start the construction; then you will receive further amounts as you receive the building work certificates; and, lastly, you will receive the rest when the building work is finished, in order to close the deal with the building company.
- It is common for the bank to apply a capital grace period during construction, so that only interest is paid and the debt begins to be repaid when the work has been completed.
Similar to what happens with regular mortgages, it is normal for these self-build loans to finance up to 80% of the construction budget or the estimated appraised value of the finished home, whichever is lower. Therefore, you must have savings to cover the remaining 20% and the costs of licensing, taxes, registrations, etc.
And something very important: the budget must be well prepared and closed. Not sticking to the budget can lead you to run out of money without having finished the construction of your home.