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EXPLAINED: How to get a 100% mortgage with Spain's new guarantee scheme

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EXPLAINED: How to get a 100% mortgage with Spain's new guarantee scheme
More than 16 million people in Spain stand to benefit from the government's new mortgage guarantee scheme. Here's everything you need to know. Soroush Karimi/Unsplash

Since Spain's government said it would act as guarantor to help young people and families secure their first mortgages, there have been a lot of questions. Am I eligible? How do I apply? What type of home can I buy? Here's what you need to know.


Spanish Prime Minister Pedro Sánchez announced on Sunday May 7th the creation of a new type of aid through Spain's Official Credit Institute (ICO) to guarantee 20 percent of the mortgage of a first home for some young people and families with children.

READ ALSO: Spain's govt to act as first home guarantor for young people and families

It will be available for all those under the age of 35 with an annual income less than €37,800 gross and for families with children under their care, providing that they haven’t bought a property previously.  

According to FotoCasa, it’s estimated that the scheme will help around 16.6 million people in Spain. Understandably, the news has excited many people but also cause a lot of questions.

Here's all you need to know about the scheme answer below.


What are the basic requirements?

In order to qualify for the ICO mortgage guarantee, there are some conditions.

The main requisites for this aid are:

  • Be under 35 years of age at the time of purchase OR be a family with dependent minors (no age limit)
  • Have an income of less than €37,800 per year per person. Up to €75,600 if there are two buyers together. According to El Economista, based on government figures, the maximum income for families with dependent children will be around €83,000. 
  • Live in Spain and have a DNI or NIE
  • Have an income and a financial profile suitable to apply for a mortgage.
  • The house you want to buy does not exceed the maximum price specified for this aid.
  • This is your first home and it will be used for habitual residence.  

What about if I have more than child?

The income threshold limits do change depending on how many children a family has. 

Just like how it is €37,800 per year per person, and up to €75,600 for two people buying a property together, the upper limit does increase slightly for every child:

  • Families with 3 children - €83,160
  • Families with 2 children - €80,640
  • Families with 1 child - €78,120

When can I apply?

Seeing as this is still a very new policy, it is unclear when the application window will officially open. The bill was only approved by the Spanish Cabinet on Tuesday, May 9th, and it is expected that the formal details will be announced when the the government finalises the agreement with the ICO.

What is known, however, is that these ICO mortgage aids can be requested until December 31st, 2025.

READ ALSO: Ten ways under-35s in Spain can get help to buy a home

Where can I apply?

The guarantee (called un aval in Spanish) can be requested through any bank that normally collaborates with the ICO. Judging by the ICO's partnered banks for its business and entrepreneur financing programmes, which includes all the major banks such as Sabadell, BBVA, Santander, and Caixa, as well as swathes of smaller local banks, so it's likely you'll be able to apply through your own bank.

How much will the ICO guarantee?

The ICO endorsement will not have an additional cost, that is, it will be free.

However, you should keep in mind that will pay interest on the mortgage, like any other, including that 20 percent guaranteed by the government. 


What type of property can I buy using the ICO mortgage?

Again, the exact details remain to be seen, particularly what the maximum price for the scheme will be. However, going off the requirements of similar local aid programmes that exist in several Spanish regions, such as Madrid and Murcia, any type of housing can be bought, both new or second-hand. It is unclear if a maximum price rule be introduced.

Spanish outlet El Economista is reporting that the initial 20 percent can be extended to 25 percent if the house that is purchased has an energy rating D or better, that is, rewarding the most efficient homes. 

Is there a minimum income requirement?

Though there is a maximum income threshold in order to be eligible for this ICO mortgage, the government has not yet outlined any minimum income requirement.

However, clearly each applicant will need sufficient funds (described as a suitable 'income and a financial profile') in order to be able to keep up with the mortgage payments, and according to FotoCasa it is likely that the individual banks will stipulate what exactly this will be.

Which documents do I need to apply?

Judging from the regional schemes that already exist, the application will request:

  • DNI or NIE (that shows you are under 35)
  • Proof that you have children (if applying as family)
  • A cadastre certificate proving that you don't already own property
  • A legal declaration that you will use the purchased property as your 'habitual residence'

The bank will also request:

  • Your last three payrolls
  • An employment contract
  • A deposit agreement or contract (known as a contrato de arras in Spanish)
  • Your personal income tax return from the previous financial year

READ ALSO: What's new for Spain's 'La Renta' tax return in 2023?


Do I have to pay back the guarantee? 

Yes, this 20 percent is a guarantee, not direct aid or a loan. In effect, the Spanish government would act as a guarantor (through the ICO) on part of the mortgage in the aim of making the property market more accessible to people who paying 100 percent of a standard mortgage might otherwise be unrealistic. 

What happens if I default on a government guaranteed mortgage?

If you default on on the 20 percent guaranteed by the government, it will be the ICO that steps in and pays the bank as guarantor.

However, according to Fotocasa, taking into account article 1838 of Spain's Civil Code, the guarantor does technically have the right to claim the debt paid to the bank plus legal interest.

However, if the default occurs after the 20 percent guaranteed by the government is paid off, responsibility will fall on the mortgage holders.

What if one person doesn't meet the requirements?

If you're wanting to buy a house as a couple (or friends) and one person doesn't meet the requirements (whether it be the financial, residential or age criteria) they will not be eligible for the ICO guarantee. 

In this situation, the only way to qualify would be if the person who does meet the requirements applied alone it alone, signs the mortgage and and buys the property without the ineligible person.


How does it actually work?

Say you want to buy a house worth €200,000. If the bank lends you 80 percent (the average amount for Spanish mortgages) without the ICO guarantee we would have to contribute €40,000 for the deposit.

However, with the 20 percent government guarantee, the bank would lend you 100 percent of the price of the house (the 80 percent plus the 20 percent guaranteed by the government).

That means that, with the government's help, you would go from paying €40,000 to only paying the sales taxes and fees, which is usually around 10 percent of the total sale price.



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