Home renovation in Eixample
Before its second life, this house had a complex layout—highly compartmentalized, dark, and marked by outdated, cold, and gray features.
What is a Promoter Mortgage?
A Promoter mortgage is a type of mortgage loan that is used to finance the purchase of a property under construction or in the process of renovation (logically, we are not referring to the purchase of a half-built property, but rather we are referring to buying a property that needs renovation and including both the property and the renovation in the mortgage). This is a very popular option for those who wish to purchase a home that needs renovation or renovate an existing one, as it allows the purchase of the property and the renovation work to be financed together.
If you are thinking of buying a house to renovate it later to your liking and you need financing, a ‘Hipoteca Promotor’ can be a good option to avoid having a mortgage on the one hand (for the house) and a loan (for the renovation) or, simply, to avoid decapitalising yourself. In this article, we explain everything you need to know about the Hipoteca Promotor, from how it works to all its advantages..
Phases of financing
The Promoter Mortgage and its phases
As we said, a Promoter Mortgage is a type of mortgage loan that is used to finance the purchase or construction of a property in the real estate market and add the renovation. This option, normally only used by property developers, is a very attractive option for anyone wishing to invest in the purchase of a property and renovate it, either to make it their home or as an investment. At Kaleidoscope we can help our clients choose the most suitable financing option for their needs, and the Developer Mortgage may be one of the most interesting. Let’s see why.
Phase
floor
At this stage, the bank, if it approves our application, will give us around 20%-25% of the loan amount so that we can start with the work. Obviously, this money should be more than enough for the refurbishment company to supply the materials and the first phases involved in a building project of this style.
Certification
phase
Whether 50% of the total amount is sufficient for the complete renovation of the house or not, as the architect in charge of the project certifies that the work is progressing according to plan, the financial institution will unblock the various outstanding payments in several instalments.
Final phase
of work
Once the renovation of the property has been completed, the architect must corroborate or certify the end of the work and confirm that the property is habitable. With this procedure, the financial institution will have to pay the remaining amount of the developer mortgage requested, which, obviously, we will have to pay back little by little.
Application and processess
How does the Promoter Mortage work?
Before we begin to enumerate the steps involved in taking out a Prpmoter Mortage, it is important to bear in mind that acquiring a property through a mortgage is a major financial decision and should be carefully planned. A detailed assessment of personal finances and the total price of the property is necessary. The following are the steps to follow in order to take out a developer mortgage:
01
Application for the
mortgagea
To obtain a Hipoteca Promotor, you must apply through a bank or financial institution. A down payment of 20-30% of the total price of the property is often required. You must also submit a number of documents, such as your credit history, your employment status and your income and expenses.
02
Valuation of
the property
Once you have submitted your application, the bank or financial institution will send an appraiser to value your home. This is important to determine the total loan amount and the repayment term.
03
Signing of the
contract
If the assessment is positive and the bank or financial institution approves your application, you will sign a Developer Mortgage contract. This contract includes the loan amount, repayment term, interest rate and any additional protection clauses you negotiate.
04
Payment of
the mortgage
Once you have signed the contract, you will start paying the mortgage through monthly instalments. These instalments include the loan principal, interest and any other fees you have agreed upon.
05
Completion
of the mortgage
When you have paid all the mortgage instalments, the property is fully financed and is yours. From that moment on, you will only have to pay the maintenance costs and any other expenses related to the property.
ADVANTAGES OF THE HIPOTECA PROMOTOR
Lower interest
rates
In general, developer mortgages offer lower interest rates than other financing options. This is because the bank or lender is lending money for the purchase of a property that has not yet been built or completed, so the risk is higher. Therefore, in exchange for taking on that risk, the bank offers a lower interest rate to attract borrowers.
Longer payment
periods
Some developer mortgages include the option to negotiate longer repayment terms than other mortgages or loans. This can be beneficial for those who need more time to repay their debt and can afford to pay lower repayments over a longer period of time.
Additional
protection
Some developer mortgages include protection clauses, such as the possibility to repay the loan early without penalty or the option to change the interest rate to a fixed rate at any time during the term of the loan. These clauses can be very useful in case of unforeseen changes in the borrower’s financial conditions.
Accessibility
This mortgage may be more accessible for those who wish to buy and renovate but do not have the capital. However, it can carry risks. By financing both the purchase and the refurbishment, the borrower assumes the risk of increased costs (hence the importance of always working with fixed terms and budgets as we do at Kaleidoscope). If your objective is the Hipoteca Promotor to invest and do, for example, ‘flipping house’ (purchase, reform and quick sale) and the value does not increase, the borrower could have difficulties to sell or refinance.
More than an architectural firm in Valencia
The Kaleidoscope method elevates the concept of comprehensive renovations
Personalised budgets and deadlines, the guarantee and professional support, and the fact that you can monitor the project with digital tools are some of the advantages of working with the Kaleidoscope method.
