Buying a home is the ultimate dream for many young people, and to achieve it, they need a mortgage.
However, not all young people qualify for a mortgage. Fortunately, there are specific aids and organizations that make it easier for those looking to take the plunge and buy their first home.
State mortgage aid for young people
In Spain, several government programs and specific grants are designed to help young people access homeownership. These grants are typically aimed at those under 35 and are intended to cover part of the costs of purchasing their first permanent home.
To adapt to a younger profile, financial institutions often:
- Extend repayment terms , offering options up to 40 years.
- Increase the financing percentage , exceeding 80% of the home's value and even reaching 90 or 95% in some cases.
- Reduce some costs associated with mortgages , such as early repayment fees.
- Slightly adjust the interests , offering slightly more competitive conditions to attract this audience.
But beyond what banks offer, the government also offers specific programs for young people, such as the ICO Guarantees from the Official Credit Institute. This mechanism covers 20% of the mortgage amount, making it possible to finance more than 80% of the purchase price.
In addition, there are subsidies to encourage rural repopulation: aid of up to 20% of the cost of the home (maximum €10,800) for those purchasing in municipalities with fewer than 10,000 inhabitants.
What requirements must be met to access these grants?
The main conditions for you to qualify for these grants are:
- Income: Not to exceed €25,200 per year (in the case of people with disabilities, this limit may increase).
- Price of the property: It must not exceed €120,000.
- Use of the home: It must be the habitual residence for at least five years.
Additionally, depending on the specific aid or program you apply for, there may be additional requirements, such as not having other properties in your name or having previously resided in the autonomous community offering the aid.
Mortgage assistance for young people by autonomous community
Some autonomous communities have designed specific programs to complement state aid and further facilitate young people's access to housing:
- Andalusia: Offers discounts on taxes such as the Stamp Duty (IAJD), reducing the rate to 0.3% for new homes (if they are under €150,000). For second homes, the Property Transfer Tax (ITP) drops to 3.5%. Additionally, guarantees are available that allow for financing up to 95% of the home's price if its value is under €295,240.
- Madrid: Through the My First Home program, young people under 40 can access a 20% guarantee that allows them to finance up to 100% of the purchase price. Starting in 2024, this assistance also extends to large or single-parent families.
- Catalonia: Offers a reduction in the property tax (ITP) to 5% (compared to the usual 10%) for young people under 33 with an annual income of less than €30,000.
- Castile and León: Reduces the IAJD (Tax on Property Tax) from 1.5% to 0.5% and the ITP (Property Transfer Tax) to 4% on second-hand homes. Additionally, it finances up to 97.5% of the home's value with a 17.5% deposit.
- Valencian Community: People under 35 can benefit from a reduction in the property tax rate (ITP) to 8% for second-hand homes if their income does not exceed €30,000 (or €47,000 in the case of a joint return).
Each community has its own conditions, so it's important to review the details of the assistance available in the region where you want to buy your home.
Our mortgage for young people
At UCI, we are one of the entities participating in ICO guarantees, a solution designed to facilitate access to housing for young people looking to buy their first home. We know that one of the main obstacles for young people is a lack of initial savings, a requirement that many institutions demand in order to qualify for a mortgage for young people.
With ICO guarantees, the Government allows these clients to finance up to 100% of the home's value. Thanks to this collaboration, we offer our young clients a tool that overcomes one of the biggest barriers to obtaining a mortgage: the down payment.
Although ICO guarantees make the process much easier, it is important to meet certain requirements:
- Be under 36 years old.
- It can be a joint mortgage , requested by a maximum of two people, provided that their combined income does not exceed €75,600 per year.
- Do not exceed €37,800 gross per year per person.
- Have legal residence in Spain for at least two years prior to the application.
- The home purchased must be the first property owned by the applicant.
In the case of homes with a high energy rating (D or higher), the guarantee can reach up to 25%.
Tips for applying for a young mortgage
To choose the mortgage that best suits you, there are several key aspects you should consider:
- Initial savings: Although some mortgages allow you to finance 100% of the home's value, don't forget that you'll need to cover other expenses, such as taxes, appraisal, and formalization, which can account for between 12% and 15% of the purchase price.
- Debt capacity: It's recommended that your monthly mortgage payment not exceed 35% of your monthly income. This calculation will help you determine how much you can afford without putting your finances at risk.
- Mortgage type: Consider whether you prefer a fixed-rate, variable-rate, or mixed-rate mortgage. Fixed-rate mortgages offer stability, while variable-rate mortgages can be more affordable in the long run, depending on interest rate fluctuations.
- Fees and ties: Analyze early redemption or subrogation fees and any additional products you may be offered, such as insurance or pension plans. Make sure the terms are truly beneficial to you.
- Compare offers: Don't settle for the first option. Shop around and compare terms and conditions among different financial institutions to find the mortgage that best suits your needs.
Get informed and plan your youth mortgage
Accessing housing as a young person can seem like a challenge, but there are multiple grants and programs designed to make the process easier. Whether through state guarantees like the ICO guarantee, regional subsidies, or favorable terms offered by banks, it's possible to find solutions tailored to your situation.
If you're thinking about taking the plunge, get your information and plan your application to make the most of these resources.