Explained: Spain’s new measure to help young people and families purchase their first home
The Spanish government has approved a new aid package for young people to buy their first house, which can reduce the cost by 20 percent.
The Spanish cabinet has recently approved an initiative that promises to change the housing market by making getting a mortgage easier for young people and families with children.
The plan is valued at €2.5 billion and seeks to help people buy their first home, who struggle to save up for a deposit.
Prime Minister Pedro Sánchez recently said at a rally in the Galician city of Vigo that the deposit "is what makes it difficult for young people and families in our country to be able to buy a home and get a mortgage”.
The government has estimated that around 50,000 people, may benefit from the new measure.
READ ALSO: What will happen to mortgages in Spain in 2024?
How will it work?
The government has approved a line of guarantees worth €2.5 billion, which will be offered by the State through the Official Credit Institute (ICO).
This essentially means that the government will act as the guarantor for young people and families who would otherwise not be approved for a mortgage.
The measure is designed to cover 20 percent of the price of the home, which is the amount that banks usually require as a deposit in order to grant a mortgage loan. Traditionally, banks finance up to 80 percent of the purchase or appraisal value of the home.
If the home has an energy rating of D or higher, the amount may go up to 25 percent.
The guarantee will be managed by the ICO for a maximum period of 10 years, which means that applicants must be prepared to live in the home for the next decade.
READ ALSO: How to get a mortgage in Spain if you don't have a job contract
Who is eligible?
The help is designed for young people under 35 years old, as well as families with children.
The Minister for Housing and Agenda, Isabel Rodríguez stated after the cabinet meeting earlier this week that there will be different conditions for each situation.
Those wanting to be considered must be of legal age and have legally been resident in Spain for the previous two years.
You must be working and have financial solvency, but must not already own your own property. There are however, a few exceptions to this rule, such as those who have lost their home through divorce or separation or those whose home is no longer suitable due to disability.
Your income must not exceed €37,800 gross per year (the equivalent of 4.5 times the IPREM). If the home is purchased by two people, the income limit will be doubled.
The income limit will also change if the family has more children and whether it is a single-parent household. In these cases, it will be increased by an extra 0.3 times the Multiple Effect Public Income Indicator or IPREM (€2,520 gross per year) for each dependent minor. In the case of a single-parent family, the limit may be increased by an additional 70 percent.
When will it be available?
The government hasn’t yet stated when those eligible can apply. The measure still has to be finalised through an agreement with the ICO. Then, the financial institutions will also have to get on board.
Loans to secure the purchase of a house will be formalised through a contract between the financial institution and the buyer and the guarantee will be considered granted at the same time the loan is awarded. There will be no extra cost for the buyer or for the bank.
The deadline to formalise the loans that qualify for the line of guarantees will be December 31st, 2025, however, the agreement between the ICO and the Ministry of Housing may be extended for two more years.
Comments
See Also
The Spanish cabinet has recently approved an initiative that promises to change the housing market by making getting a mortgage easier for young people and families with children.
The plan is valued at €2.5 billion and seeks to help people buy their first home, who struggle to save up for a deposit.
Prime Minister Pedro Sánchez recently said at a rally in the Galician city of Vigo that the deposit "is what makes it difficult for young people and families in our country to be able to buy a home and get a mortgage”.
The government has estimated that around 50,000 people, may benefit from the new measure.
READ ALSO: What will happen to mortgages in Spain in 2024?
How will it work?
The government has approved a line of guarantees worth €2.5 billion, which will be offered by the State through the Official Credit Institute (ICO).
This essentially means that the government will act as the guarantor for young people and families who would otherwise not be approved for a mortgage.
The measure is designed to cover 20 percent of the price of the home, which is the amount that banks usually require as a deposit in order to grant a mortgage loan. Traditionally, banks finance up to 80 percent of the purchase or appraisal value of the home.
If the home has an energy rating of D or higher, the amount may go up to 25 percent.
The guarantee will be managed by the ICO for a maximum period of 10 years, which means that applicants must be prepared to live in the home for the next decade.
READ ALSO: How to get a mortgage in Spain if you don't have a job contract
Who is eligible?
The help is designed for young people under 35 years old, as well as families with children.
The Minister for Housing and Agenda, Isabel Rodríguez stated after the cabinet meeting earlier this week that there will be different conditions for each situation.
Those wanting to be considered must be of legal age and have legally been resident in Spain for the previous two years.
You must be working and have financial solvency, but must not already own your own property. There are however, a few exceptions to this rule, such as those who have lost their home through divorce or separation or those whose home is no longer suitable due to disability.
Your income must not exceed €37,800 gross per year (the equivalent of 4.5 times the IPREM). If the home is purchased by two people, the income limit will be doubled.
The income limit will also change if the family has more children and whether it is a single-parent household. In these cases, it will be increased by an extra 0.3 times the Multiple Effect Public Income Indicator or IPREM (€2,520 gross per year) for each dependent minor. In the case of a single-parent family, the limit may be increased by an additional 70 percent.
When will it be available?
The government hasn’t yet stated when those eligible can apply. The measure still has to be finalised through an agreement with the ICO. Then, the financial institutions will also have to get on board.
Loans to secure the purchase of a house will be formalised through a contract between the financial institution and the buyer and the guarantee will be considered granted at the same time the loan is awarded. There will be no extra cost for the buyer or for the bank.
The deadline to formalise the loans that qualify for the line of guarantees will be December 31st, 2025, however, the agreement between the ICO and the Ministry of Housing may be extended for two more years.
Join the conversation in our comments section below. Share your own views and experience and if you have a question or suggestion for our journalists then email us at [email protected].
Please keep comments civil, constructive and on topic – and make sure to read our terms of use before getting involved.
Please log in here to leave a comment.