In short: what the options are
Renovations in Spain are usually funded in one of four ways, or a mix of them: your own savings, a personal renovation loan, a mortgage (extending the current one or a new one covering purchase and renovation) and public grants for energy efficiency or accessibility. The choice depends on the amount, your profile with the bank and how quickly you need the money.
BCN YARD does not give financial advice or arrange loans. Compare product terms with your bank or an independent financial adviser. Our part is to give you a quote and a payment schedule that make that conversation straightforward.
First, work out the full amount
The most common mistake is to finance the figure on the quote rather than the real cost of the project. For example, a 100 m² flat in the Eixample at Basic level starts at around €100,000 excluding VAT. On top of that come VAT, whose rate depends on the type of work; the permit and municipal fees; the architect's project, if one is needed; furniture and appliances that are not in the quote; and renting somewhere else during the works, if you cannot live in the flat.
Above that, keep a contingency for surprises, especially in an older building. Only that total is what actually needs financing.
Savings and a personal loan
Your own funds give you freedom: no waiting for approvals, valuations or a notary, and the renovation schedule depends only on you and the contractor. The downside is obvious: a large renovation ties up a significant share of your savings.
A personal renovation loan is arranged faster than a mortgage and usually needs no property as security, but the term is shorter and the overall cost of borrowing tends to be higher. The monthly payment on a large sum ends up high. That is why it is more often used for part of a renovation, or alongside savings, than for an entire full-scale project.
A mortgage: extension or purchase plus renovation
If the flat already has a mortgage, the bank may consider extending it for the renovation. If you are buying, some lenders finance the purchase together with the renovation. Either way you will need a valuation (tasación), a notary and time for approval that the contractor cannot speed up.
The bank will usually want to see a detailed quote and, for works that need a permit, the relevant paperwork. Terms for non-residents are generally tighter than for residents: a lower loan-to-value and more documentation. Only the bank knows the exact figures, so get them before signing a building contract with a fixed start date.
Grants and tax relief
From time to time the Generalitat de Catalunya and local councils open grant schemes for energy efficiency, building refurbishment and accessibility: insulation, windows, heating and cooling systems, lifts. Schemes change, budgets run out and conditions differ from year to year.
Before signing the contract, check the Generalitat and town hall websites for a current scheme that fits, and whether it requires you to apply before work begins. Ask your gestor about the tax implications of the renovation and any deductions. Relying on a grant as your main source of money is risky: the decision arrives later than the contractor needs paying.
How the quote and schedule help with the bank
A detailed quote broken down by item and stage justifies the amount requested far better than a single figure on a page. If the bank releases money in tranches, it helps to tie each tranche to a stage of the works: strip-out and services, first fix, finishes, completion.
We work under a contract with stage payments, so the schedule of payments to the contractor can be laid out alongside the bank's drawdown schedule from the start. We prepare the quote after a site visit and measurements, and we reply to enquiries within an hour. Take the quote, the contract and the company details to the bank: lenders often check the contractor as well.
Mistakes that cost money
Signing a contract with a start date before the financing is approved, then paying a penalty or leaving the site idle. Forgetting VAT and finding a 10% or 21% gap on the first invoice. Keeping no contingency and running out of money at the finishing stage, with the expensive first-fix work already paid for. Taking a short-term loan with a repayment that squeezes the household budget for years.
And one more: choosing a contractor simply because their figure is lower and you need to borrow less. If the quote is incomplete, whatever is missing will reappear as extras halfway through, when taking out another loan is much harder.