<img height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=1714605622184904&amp;ev=PageView&amp;noscript=1">

How to pay for a new development home

como-pagar-una-vivienda-sobre-plano

Different ways of paying for a new development property depending on whether the buyer needs financing or not.

Purchases of new development properties are once again gaining strength in our country. According to the National Statistics Institute, a total of 92,844 new development properties were sold in 2019. Alicante is the province with the highest number of new construction licences granted. 

Moreover, according to data provided by Fotocasa, buyers of new development properties represented 37% of the total number of transactions in 2019 (8% more than in 2018).

With figures like this it's hardly surprising that the number of queries regarding how to pay for new development properties is increasing considerably:

- What are the methods of payment for an off-plan property?

- How are advance payments to the developer safeguarded?

- What is an under-construction purchase contract? 

In this article, we'll try to clear up all the doubts about the protocols to follow when it comes to paying for a new development, off-plan property and the differences in the process depending on whether or not the buyer needs financing.

Payments for an off-plan property 

There are two types of payments the buyer must make before acquiring their new development property: 

Reservation

Also known as a deposit, this is an amount paid to reserve the property until the sales-purchase contract is formalised. This reservation is included in the final purchase price.

The main difference between this payment and the ones we will describe below (instalments) is that both the buyer and the vendor can voluntarily withdraw from the contract and pay a penalty (forfeit deposit). This penalty is for the amount of the deposit paid.

Instalments

Amounts of more than 20% of the price of the property are usually considered to be instalments. They are normally paid periodically during construction of the property and, just like the reservation, will be subtracted from the final balance.

The instalments differ from the reservation as, in case of failure to meet the contract, only the adherent party will be able to terminate the contract (when breached by the other party) or demand it is fulfilled. In this case, they can also claim for damages.

The developer must guarantee the amounts paid are completely safeguarded through insurance or endorsement.

Methods of payment for a new development property 

The protocols to follow to pay for a new development property depend on whether or not the buyer needs financing. Below we explain the protocols we follow at Modern House for each case.

Without financing 

  1. The buyer reserves the property by paying a deposit of 6,000 euros.
  2. 10 days after the reservation payment, the sales-purchase contract is signed. At this point the buyer delivers 10% of the price of the property.  
  3. The buyer will make monthly payments of 10% of the price of the property until their home is completed. Altogether, they will have to make 6 or 7 monthly payments.
  4. The remaining amount (approximately 20%) will be paid when construction is finalised, when the keys are delivered. 

*Once 30% of the price of the property has been paid, the buyer has the possibility of creating an under-construction title deed in their name, registering them as the owner of the property from that point. 

With financing 

  1. The buyer reserves the property by paying a deposit of 6,000 euros.
  2. 10 days after the reservation payment, the sales-purchase contract is signed. At this point the buyer delivers 10% of the price of the property.  
  3. Up to this point, the purchase process is the same in both cases. From now on is where the main differences are apparent. 
  4. The buyer will pay between 30% and 40% of the price of the property during construction. 
  5. The remaining balance of the full price of the property will be paid by obtaining a mortgage once the property is finished. 

* In this case, the possibility of registering as the owner of the property under construction is not included as, if the buyers were unable to obtain a mortgage, they would be unable to pay the balance. 

Other payments 

As well as the payments to reach 100% of the price of the property, the buyer will also have to cover various additional costs linked to any new development property purchases. To find out more about them, you can download our expenses and taxes infographic. 

Nueva llamada a la acción

Modern House , 21 April 2020

Tags: paperwork, costa blanca new development information, new villa purchase costs, purchase process, new development villas Costa Blanca

    Get Costa Blanca News

    Nueva llamada a la acción