Construction and off-plan purchase loan in Belgium

The construction loan: how does it work?

A construction loan is a mortgage adapted to a building site. The bank does not pay you the whole amount on the day of the deed. It releases the funds in instalments, as the work progresses.

During the works, you generally pay interest only on the sums already used. Some banks also charge a commitment fee on the part not yet drawn. Full repayment then starts at the end of the works or on the date set in the offer.

VAT, duties and costs: the budget of a new-build project

First, a new home follows different tax rules from an older house. VAT applies to the construction, while the land normally remains subject to registration duties.

• VAT : it is added to the construction price. In some cases, a reduced rate exists under conditions, for example for demolition and reconstruction.
• Land : registration duties and deed costs apply to its purchase.
• Loan costs : the mortgage deed and any file costs are also added to the budget.

As for any purchase, notary fees and duties remain at your expense. Estimate them with our notary fees simulator, then have the applicable regime confirmed by your notary.

Construction loan: a payment schedule to anticipate

However, the main challenge of a construction loan is the schedule. During the works, you often pay rent on top of the loan interest. Your budget must therefore hold for the whole duration of the works.

• Before the works : planning permission, signed quotes, complete budget and own funds available.
• During the works : release of instalments on presentation of invoices or progress reports.
• At the end of the works : start of full repayment, capital and interest.

That is why we check with you that each stage remains financeable, even if the works are delayed.

Construction loan: the Belgian rules to know

In Belgium, a new-build project is subject to federal and regional rules. Here are the three points that matter most for your financing.

• Planning permission : the municipality issues it according to the rules of your region. The bank also asks for it before releasing the construction funds.
• EPB standards : Brussels, Wallonia and Flanders each impose energy requirements for a new home. Compliance is checked at the end of the works.
• Breyne Act : for an off-plan purchase from a developer, it requires in particular staggered payments and a completion or refund guarantee.

Construction loan: what banks look at

First, banks analyse your repayment capacity. They also look at the strength of the project: detailed quotes, registered contractor, permit obtained and a margin for the unexpected. A precise file therefore reassures the bank and improves your chances of approval.

This is where a broker makes the difference. We present your construction loan to the most suitable banks, among 7 banks compared. Then we negotiate the rate, the term and the release terms. In addition, a new home with a good EPC can weigh favourably in the negotiation.

How your application works

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Frequently asked questions about construction loans

Page written by Hypoprime, mortgage broker in Brussels. The financing of a new-build project depends on your profile, the project and the banks' policy; purchase costs still need to be planned for. A complete analysis is essential. Warning: borrowing money also costs money.