Signing an arras contract before having the mortgage definitively approved is a completely common situation in the Spanish real estate market. However, it is also one of the greatest sources of stress for the buyer.
The real problem appears when the bank denies the transaction, grants less money than necessary to complete the purchase, or the appraisal is lower than the agreed price. The buyer, who has already paid a very significant amount as a deposit, fears losing their savings due to not being able to sign the deed of sale (escritura de compraventa).
In Catalonia, there is a specific regulation that protects the consumer in these circumstances, allowing them to withdraw and recover the money paid under certain conditions. However, this protection does not operate automatically nor is it the same throughout Spain. The exact content of the contract, the agreed deadlines, and the buyer's way of acting are decisive to avoid losing the money.
Are the arras lost if the bank denies the mortgage?
Not necessarily, but it will depend on the applicable legislation and what was formally agreed on paper.
Within the scope of Catalan civil legislation, article 621-49 of the Código Civil de Cataluña establishes a very clear protection for the buyer: when the contract provides that all or part of the price will be financed through a credit institution, the buyer may withdraw from the contract if they documentarily prove, within the agreed period, that the designated financial institutions have refused to grant the financing.
This right of withdrawal has strict conditions to be effective:
- Express provision of financing: The contract must reflect that the payment depends on a mortgage loan.
- Absence of exclusion: The parties must not have expressly agreed to waive this legal right.
- Documentary proof: The buyer must provide real and suitable proof issued by the bank that the mortgage has been denied.
- Buyer's diligence: The denial cannot be due to the inactivity, neglect, or fault of the buyer themselves (negligence).
- Communication within the deadline: The withdrawal must be sent in writing in a verifiable manner (fehaciente) to the seller before the agreed deadline expires.
Outside Catalonia, the common Código Civil governs, where this automatic clause does not exist. In that case, the only way to recover the money paid is to have previously included a financing clause drafted by mutual agreement between the parties.
What the arras contract must say
For the protection to work with guarantees, declarations of intent are not enough. The first key check consists of reviewing whether the contract indicates that the purchase depends entirely on obtaining the mortgage.
It is not the same for the document to say:
“The buyer states that they will request financing for the payment of the price.”
As establishing a protective and conditional wording:
“The present sale is expressly conditioned on the buyer obtaining a mortgage loan for a minimum amount of 250,000 euros before November 15, 2024. If not obtained, the buyer may withdraw, fully recovering the amounts paid.”
A good financing clause must detail with precision:
- The minimum amount that needs to be financed.
- The deadline for the entity to issue a response.
- The number of banks that will be consulted.
- The way to notify the seller of the refusal.
- The specific consequences if the appraisal is insufficient.
Before committing your savings with the signature of this document, it is crucial to carry out pre-purchase checks and ensure that the wording does not contain abusive clauses or implicit waivers of your rights.
What happens with arras penitenciales?
In Catalonia, unless the parties specify otherwise, the amounts paid are considered by default arras confirmatorias (as a payment on account of the total price). For them to operate as arras penitenciales —which allow either party to back out by losing the money (if the buyer withdraws) or returning it doubled (if the seller does)—, it must be explicitly specified in accordance with article 621-8 of the Catalan Código Civil.
However, case law and the law support that, if a financing condition has been agreed upon or the legal protection of article 621-49 applies, the justified withdrawal due to denial by the bank is not considered a breach of contract. Therefore, the buyer is entitled to recover every single cent paid, even if it involved arras penitenciales.
The Consejo General del Notariado strongly advises having preventive counseling so that the typology of the arras and the return mechanism are perfectly defined.
How must the denial of the mortgage be proven?
A simple phone call or an informal WhatsApp message from the bank manager saying "don't worry, they are not approving it" is not enough. To legally and safely exercise the withdrawal, the entity's refusal must be proven in a verifiable manner.
The buyer must provide a certificado de denegación de financiación formally issued by the bank's risk department. This document must contain:
- Clear identification of the applicant and the property subject to the transaction.
- Exact amount of the requested loan.
- General causes of the denial (payment capacity, risk profile, or insufficient appraisal).
- Authorized signature and stamp of the financial institution.
Additionally, it is recommended to keep all documentation proving that you acted on time: the formal loan application, the financial documentation provided, and the emails exchanged with the bank. This documentation will be your best defense if the seller objects to returning the amount of the arras.
What does it mean that the denial is not due to the buyer's negligence?
The law protects the diligent buyer, but not the one who uses the denial as an excuse to back out without real justification. If the bank's refusal is a direct consequence of the buyer's inaction or fault, the buyer will lose the arras paid.
The buyer is considered to act negligently if:
- They submit the mortgage application outside the reasonable deadlines set in the contract.
- They refuse to deliver the financial documentation required by the bank's risk department.
- They provide false, incomplete, or outdated data.
- They assume new financial commitments simultaneously (for example, applying for financing to purchase a car around the same dates), voluntarily reducing their debt capacity.
To prove that you have been diligent, it is essential to start the mortgage procedures on the same day the arras are signed and to keep a record of all documentation sent to the bank.
What happens if the appraisal is lower than the purchase price?
The appraisal of the property is one of the most critical moments of the buying process. According to the regulatory criteria of the Banco de España, banking entities usually finance, as a general rule, a maximum of 80% of the appraisal value or the purchase price (usually the lower of the two).
Practical example of the impact of a low appraisal
- Agreed purchase price: €250,000
- Requested financing (80%): €200,000
- Real appraisal value of the property: €210,000
- Maximum loan the bank will give (80% of €210,000): €168,000
- Difference in capital that the buyer must provide: an additional €32,000.
If the buyer does not have those additional €32,000 saved, the transaction will be unfeasible. Technically, the bank does not deny you the mortgage, but rather grants it for a lower amount.
To avoid getting caught in this legal loophole, the arras contract must explicitly detail that the feasibility of the contract depends on obtaining a percentage of financing calculated on the purchase price, or define what will happen in the event of an appraisal lower than expectations.
💡 Is the bank granting you less money than you need? We review the financing clause of your contract to check if you can withdraw from the purchase without losing your savings. Review my contract
And what if the bank grants the mortgage with worse conditions?
Another common problem is that the entity approves the mortgage, but under very unfavorable conditions that make payment unfeasible in the long term: abusive interest rates, mandatory purchase of multiple expensive linked products, or the requirement of personal guarantors with additional solvency.
Under the protection of the Ley reguladora de los contratos de crédito inmobiliario (LCCI), you have the right to reject a bank offer, but this does not automatically give you the right to recover the arras if the generic contract only mentioned "obtaining financing".
For your safety, it is essential that the arras document defines the limits of the acceptable mortgage: maximum interest rate, amortization period, and whether or not the provision of guarantors is required.
Is a bank pre-approval enough?
A preliminary solvency analysis should not be confused with the actual approval of the loan. Many buyers sign the arras confident in a favorable feasibility study.
However, the mortgage transaction is not firm until the entity issues the Ficha Europea de Información Normalizada (FEIN). This document constitutes a binding offer for the bank after exhaustively analyzing both your economic capacity and the situation of the property after the appraisal. We always suggest gathering all documentation before signing arras so that the bank can draft as reliable a study as possible.
Can you be required to apply for the mortgage at several banks?
The Código Civil de Cataluña refers in a plural manner to "the entities" designated. Unless it is expressly agreed in the contract that the refusal of a specific entity is sufficient, the usual and prudent practice is to request the mortgage from a minimum of two or three different banks.
In this way, we demonstrate to the seller that a real and honest attempt has been made to obtain the capital, and we will avoid being accused of negligence when withdrawing.
What to do if the bank denies financing (Step by step)
If you find yourself in this situation, take a deep breath and strictly follow these steps to safeguard your money:
- Analyze the deadlines: Check immediately how many days you have left according to the arras contract to notify the seller.
- Request the formal certificate: Demand from your bank manager the official denial letter signed by risks.
- Draft the withdrawal: Prepare a document detailing that you are exercising your technical right of withdrawal as you have not obtained the necessary financing under the agreed conditions.
- Verifiable notification: Send the withdrawal along with the bank's denial via burofax with acknowledgment of receipt and certification of content. Do not use email or telephone as the sole channel.
- Demand the return: Formally request the refund of the arras money to the indicated current account.
What happens if the seller does not return the arras?
If the seller refuses to return the money or does not reply to your requests, the situation moves to a level of contractual conflict. In these cases, it must first be verified whether the property had hidden charges or legal problems; for this, we suggest consulting how to review property charges in case there were other reasons for termination.
If the denial was justified and was notified in due time and form, the seller is obliged by law to return the funds. If the blockage persists, you must go to court to file a claim for the amount based on the arras contract and the evidence of bank denial.
How to correctly draft the financing clause
An optimal protection clause must clearly resolve the following questions:
- What is the minimum amount that needs to be financed? (e.g., 80% of the purchase price).
- What deadline does the buyer have to present offers? (at least 30 to 45 days is recommended).
- How is the denial justified? (denial certificate from a fixed number of financial institutions).
- What is the deadline to return the arras after notification? (usually 3 to 5 business days).
Having legal technical support before signing anything is the only way to guarantee your savings. To do this, a comprehensive real estate due diligence service will shield you against unpleasant surprises.
Frequently asked questions
Does a denial letter always allow recovering the arras?
Not automatically. In addition to providing the letter, you must prove that you carried out the procedures within the stipulated period and that the reason for the loan rejection was not caused by your lack of cooperation or omission of documents (negligence).
Can I recover the arras if the bank lends me less money?
It will depend on the wording of the arras contract. If the purchase was conditioned on receiving an exact amount or a specific percentage (such as 80% of the sale value) and the bank grants less, you will be able to withdraw. If the arras contract was unconditional, you could lose the arras for not completing the sale.
What happens if the appraisal comes in low?
If the appraisal value of the property is insufficient for the entity to authorize the required capital, you can make use of the financing condition of the contract. Therefore, it is important to include explicit mention of the percentage of the actual appraisal in the arras document.
Can I reject the mortgage because the interest rate is too high?
Legally, if the bank issues the FEIN and you are the one who declines the offer based on the fact that you do not like the interest rates, it does not count as a formal denial by the bank, unless you had incorporated into the arras clause the exact limit of the interest rate you were willing to assume.
How much time do I have to communicate the denial?
The specific notification period is that expressly indicated in the wording of the arras agreement itself. It is a priority to communicate the unfeasibility before the established expiration date to avoid breach of contract.
Are arras penitenciales lost if I do not obtain financing?
No, as long as the clause for obtaining financing has been properly provided for or the Código Civil de Cataluña is applicable, which exempts the buyer from the financial penalty of losing double or the capital paid for justified reasons beyond their control.
Conclusion
The fact that the bank denies you the mortgage after signing arras does not necessarily imply losing the sums paid. The legal system in Catalonia offers excellent protection mechanisms for the buyer acting in good faith and with due diligence, provided that the contract does not contain abusive clauses that limit these rights.
The absolute key to the success of the transaction lies in a correct drafting that defines in detail what mortgage you need to acquire your future home.
At INMODOCS, we analyze the legal feasibility of your arras contracts and accompany you throughout the process of claim or contractual defense against bank denial.
⚖️ The difference between recovering and losing the arras can lie in a single clause. We analyze your contract, the bank's denial, and the applicable deadlines to protect your interests. Request a review
Before signing arras
If you are considering a purchase in Barcelona, review the complete guide: Buying a flat in Barcelona without surprises.