Collateral in Private Real Estate Debt: 2026 Guide
Short answer: in private real estate debt, the main collateral is usually a mortgage over the property, which can be reinforced with a pledge over the shares of the borrowing company and a personal guarantee. Each protects in a different way, and none removes the risk of loss.
If you want to understand collateral in private real estate debt, this guide explains what each type is, how they are combined and what to check before lending. It is not legal advice or an investment recommendation. For the valuation side, see first how alternative mortgage lending works in Spain.
Real estate mortgage: the main collateral
A mortgage charges a specific property in favour of the creditor. Under Spain’s Civil Code, it is validly created only if it is set out in a public deed and registered in the Land Registry. Without registration, there is no mortgage.
If the borrower defaults, the creditor can start mortgage enforcement under the Civil Procedure Act (articles 681 onwards). It is a court procedure with timelines and costs: the collateral exists, but payment is not immediate.
Two factors determine its real strength:
- Ranking: the order of registration decides who is paid first.
- LTV (loan-to-value, the loan as a share of the property’s value): the lower it is, the greater the margin for error.
Additional collateral: share pledge and personal guarantee
Besides the mortgage, other guarantees are often added. These are the three most common:
| Collateral | What it charges | How it is formalised | Main limitation |
|---|---|---|---|
| Mortgage | A specific property | Public deed and land registration | Depends on sale value and ranking |
| Share pledge | Shares of the company that owns the property | Public document | Worth what the company is worth |
| Personal guarantee | The guarantor’s assets | Guarantee contract (Civil Code, art. 1822 onwards) | Depends on the guarantor’s solvency |
A share pledge allows the creditor, in case of default, to act on the borrowing company instead of enforcing only against the property. It can shorten timelines, but its value depends on the company having no hidden debts.
A personal guarantee adds a second pool of assets to claim against. It only helps if the guarantor has enough assets and liquidity, which should be checked with documents rather than taken on trust.
Property damage insurance policies naming the creditor as beneficiary, and pledges over bank accounts or receivables, are also common. Everything depends on the specific contract.
Illustrative and hypothetical example: when the collateral covers the loan
A property valued at EUR 1,000,000 secures a loan of EUR 550,000 (55% LTV). For simplicity, we assume the property is sold in enforcement with costs and discounts of 10% of the price, and we ignore default interest.
| Sale price | Net after costs (10%) | Loan recovered | Loss on principal |
|---|---|---|---|
| EUR 1,000,000 | EUR 900,000 | EUR 550,000 | EUR 0 |
| EUR 600,000 | EUR 540,000 | EUR 540,000 | EUR 10,000 (1.8%) |
| EUR 500,000 | EUR 450,000 | EUR 450,000 | EUR 100,000 (18.2%) |
| EUR 400,000 | EUR 360,000 | EUR 360,000 | EUR 190,000 (34.5%) |
The takeaway is clear: a mortgage protects well while the sale price holds, but a sharp fall in value creates losses. Additional collateral only fills that gap if the guarantor or the company can pay.
Trends: what is happening worldwide and in Spain
- Euro area, 29 October 2026: the ECB left its key rates unchanged (deposit facility at 2.50%) and said financing conditions have tightened since its previous meeting. Source: ECB press release. For an investor, more expensive and demanding financing means checking the borrower’s ability to pay more carefully.
- Spain, 30 October 2026: the INE (Spain’s statistics office) flash estimate puts CPI inflation at 4.9% year on year, with core inflation at 3.1% (provisional figure). Source: INE release. High inflation can strain construction costs and borrowers’ cash flow, which makes collateral matter more.
- Spain, October 2026: according to the Observatory of Alternative Financing with Mortgage Collateral in Spain, with market analysis by PwC and legal framework by Cuatrecasas, the average LTV of alternative debt is 55%, and bank credit to real estate and construction has fallen by 80% since 2008 (Banco de España, Spain’s central bank). More data in our article on alternative mortgage lending in Spain.
Risks to consider
- Loss of capital: every investment carries risk, including partial or total loss. Collateral mitigates risk but does not eliminate it.
- Valuation: if the appraisal is optimistic, the real LTV is higher than it looks.
- Court timelines and costs: enforcing collateral can take time and reduce recovery.
- Prior charges: earlier mortgages, attachments or occupants can reduce the property’s value. Check with a land registry extract.
- Personal or corporate guarantees: they are worth what the backing assets are worth.
- Illiquidity: private debt is not listed, and exiting before maturity may not be possible.
What to check before investing
- The registration of the mortgage and its ranking in the Land Registry.
- The LTV against an independent, prudent appraisal.
- Charges, leases or occupation of the property.
- The real solvency of the company and the guarantors.
- The borrower’s exit plan: how and when the loan will be repaid.
How Ondara Group works
Ondara Group is an alternative investment manager based in Barcelona, active since 2018. We structure private debt transactions with real assets as collateral, analyse each transaction individually and aim to diversify. Investors deal directly with the management team; the minimum investment is EUR 25,000. We pursue target double-digit returns, which are a target and never guaranteed. Meet the team and our brands.
Frequently asked questions
Which is better, a mortgage or a share pledge?
They are not mutually exclusive. The mortgage falls on the property; the pledge, on the company that owns it. Many transactions combine both.
Does a mortgage remove the risk of losing money?
No. It reduces the expected loss if the property is worth more than the debt, but value, timelines and costs can change.
What if the guarantor has no assets?
The guarantee loses practical use. That is why it is worth checking solvency before giving it any weight.
How do I know the mortgage is properly created?
Check the registration in the Land Registry through an extract, and review the ranking and any prior charges.
Can the creditor claim more than the property’s value?
It depends on the contract and the additional guarantees. Always consult a legal professional.
In summary
- A registered mortgage is the main collateral; its ranking and the LTV determine its strength.
- A share pledge and a personal guarantee add to it, but depend on the solvency behind them.
- In the illustrative example, a fall in the sale price to EUR 500,000 leaves a loss of 18.2% of principal.
- With inflation at 4.9% and tighter financing, check the ability to pay, not just the property’s value.
- Every investment carries risks, including loss of capital.
Invest in private debt with real collateral and direct contact
If you would like to know how we invest, register as an investor and we will explain how it works. The minimum investment is EUR 25,000.
This article is for information purposes only and does not constitute an investment recommendation or financial advice. All investments carry risks, including the possible loss of the capital invested, and past or target returns do not guarantee future returns. Analyse each opportunity with a professional before investing.
