Finca rústica or urbana - what's the difference?

After enough research, you have made the decision to invest in a property in Spain. The next step is to find a property that meets your needs. Will you go for a rustic finca or an urbano type anyway? Here it is very important to weigh up all the pros and cons of the different types of property. We are happy to help you with that!

What is a finca?

If you have been to Spain more often, you have probably heard of a "finca". What many people envisage here is a farmhouse or country house in a beautiful rural setting, but actually a finca is nothing more than a plot, with or without buildings. In Spain, they know different types of fincas. For each finca, the Plan General de Ordenación Urbana (zoning plan) defines the type of use allowed for that particular finca.

We briefly explain the different types of zoning plans:

Finca rústica

It sounds very idyllic, a finca rústica. Perhaps you immediately have an image in mind of a real Spanish country house on a quiet plot. Unfortunately, that is not quite the case (yet). A finca rústica is actually a piece of land that is not zoned for housing. For example, it is often pieces of agricultural land, nature reserves or forests.

It is good to consider why you want to invest. After all, do you have the idea of building or refurbishing a property in order to sell it again? For Spanish people, it is often already very difficult to finance or sell a finca rústica. These were traditionally bought or even traded in cash. So ask yourself carefully whether you want to take that risk as a foreigner (non-resident).

Want a finca rústica with an existing property? Keep in mind that it is often located in the countryside. A remote location with not all utilities and few facilities within a short distance.

Few banks finance this type of housing because:

1. There are often flaws in rústica homes. Think illegal square metres or permits that are missing.
2. The property is located in an unpopular place. If the mortgagor fails to pay her mortgage and the bank takes this collateral as bank collateral, it will be difficult to be able to sell this property.

Important check: the valuation report

The property valuation is hugely important, as this is where defects in the property are often revealed. An example is that the property is 100 square metres, but only 75 square metres are legally registered. Only the legally registered metres can be appraised, resulting in a lower appraisal value.

Other aspects that may emerge in the appraisal report include certain advertencias or condicionantes or missing permits that are included in the appraisal report, preventing a bank from reaching funding can pass. So it is important to take a good look at the valuation report beforehand.

The property valuation is hugely important, as this is often where defects in the property are revealed.

Finca Rustica funding

Do you want to apply for financing for a Finca Rustica? Think carefully about whether you need a mortgage in Spain want to take. If so, Pedro always recommends doing the following two things first:

• Get a lawyer to check the property, including all permits!
• Have a bank value the property first, before you pay a reservation.

An alternative is to use your surplus value in NL or BE record, to buy your Finca contact. This avoids the need to check the Spanish collateral. You can do Pedro's Surplus value check for this purpose:

Do the excess value check

Building your own home on rustic land

Do you prefer to build your own home? This is certainly not impossible, but it is an incredibly difficult process, especially if it involves a mortgage in spain goes. Unless everything is stated correctly in the valuation report, the purchase can take place without additional permission. Is this not the case? Then you need to apply for a permit. You have to take into account the fact that the municipality has laid down in a zoning plan how big the plot may be if building is done on this piece of land. There are also various rules governing the construction itself, such as the prohibition of paved roads to the finca. All in all, this can become a very lengthy and costly process without the desired outcome.

In addition, banks in Spain will be reluctant to provide a mortgage for the purchase of such a property. Only if the permits are tiptop, the status of the property is in order (is there electricity and running water) and the documents have been checked by a lawyer, the bank will (possibly) give approval. In short: work to do and hire a lawyer!

Finca Urbana

When it is a 'finca urbana' concerns, the choice to invest becomes a lot more attractive. Among other things, a property urbana can be recognised by its location, located on the coast or in a village/town. There are facilities like a supermarket or restaurant a short distance away. This makes it an attractive location and, with a finca urbana, there is often more certainty that the property can be sold quickly as a bank repossession. This makes it more interesting for a Spanish bank to finance.

It is also very important for a finca urbana to see the valuation report, but is less likely for this type of property to have hidden defects. In addition, for a finca urbana, there is a building permit in the zoning plan included. Should you have the desire to build your own home, however, it is important to look at all further building regulations stipulated in the zoning plan. This way, you will know in advance whether your investment can come into its own on this plot. If you take into account the indicated building regulations, obtaining permits (if any) will be fairly straightforward.

Finca Urbana funding

In terms of a mortgage for a finca Urbana in Spain you will generally encounter few problems. If you are unsure of the permits in the zoning plan, get these checked beforehand. Also, here, an upfront valuation by the bank is always a requirement and even desirable at an early stage. In Spain purchase is subject to financing namely, not by default.

Finca Urbanizable

The name may suggest otherwise, but this is a finca rústica. The only difference is that the land possibly developed can be for urbanisation. To convert to a finca urbana, a Plan Parcial be submitted. This will include the plot boundaries and the purpose of the development. Only after approval of the Plan Parcial can planning permission be applied for.

Keep in mind - especially for a mortgage - that arranging a Plan Parcial and planning permission can take months or even years. After all, we are talking about Spain.

A mortgage for Spanish property

Wondering what we can do for you in the purchase of a finca urbana? We help home seekers, entrepreneurs and investors in Spain to finance property.

Start your mortgage calculation

Or rather first consult with Pedro?

How do I finance a finca urbana?

Cedula de la Habitabilidad

An important document for buying a property in Spain is the Cedula, or residential licence. The Cedula is issued as soon as the property is found to be 'habitable' from a legal point of view, and thus the status Finca Urbana has. For a newly built house, the habitability of the house is assessed upon completion of the house. After this, a Cedula is issued.

This licence is of great importance as without a Cedula you absolutely cannot get a mortgage from the Spanish bank. You will also run into problems in other matters, such as applying for connection to water or electricity.

What are the main concerns when buying a home?

When you want to invest in real estate or a property in Spain, new construction or existing, it is important to check beforehand whether you are dealing with a finca rústica or urbana. After all, this can have a big impact on your own zoning plan for the plot.

Therefore, think carefully about the purpose of your purchase in Spain. Do you want quick clarity and less long lead times with permits? Then definitely opt for an Urbana property. Are you not averse to a challenge and do you choose a property in the countryside that you want to enjoy first and foremost yourself, finance it without a mortgage and with a long-term vision? Then a finca rústica may be an option.

In either case, check beforehand what is stipulated in the zoning plan so that you know clearly what you need to take into account.

In addition, it is good to check which banks can provide financing for a finca. For example, most affiliated banks to Spanish Mortgage do not finance finca rústica, but do finance fincas urbanas. If you buy entirely with your own money, then you are free in your choice. Do you want a part mortgage financing? Then the choice is more limited.