One of the star measures of the Government of Pedro Sánchez, the line of guarantees from the Official Credit Institute (ICO) to facilitate the entrance to a first home to young people under 35 years of age and families with young children in their care, will be ‘banned’ to 78% of young peopleso they will only be able to access the guarantees two out of ten young people22%, and as long as they buy the home in couple.
The Government’s intention with the approval of these guarantees was to offer both groups, young people and families, the possibility of obtaining a mortgage with 100% financing of the purchase and sale price of the property: the usual 80% financed by banking entities and the remaining 20% financed thanks to the guarantee. The amount of the line of credit is 2.5 billion of euros and it is intended to facilitate the acquisition of 50,000 homes.
Young people who can qualify for these guarantees must have income less than 37,800 euros annual gross, although in case of purchasing in couple This maximum amount will be doubled up to 75,600 euros. However, they must be solvent and earn enough salary for the bank to grant them the mortgage.
Furthermore, depending on the autonomous community where the apartment is located, the maximum purchase price of the property varies: 200,000 euros in Extremadura; 225,000 euros in Andalusia; 250,000 euros in Asturias, the Canary Islands, Cantabria, Castilla y León, Castilla-La Mancha, Galicia, Murcia, La Rioja and Ceuta and Melilla; 275,000 euros in Aragon and the Balearic Islands; 300,000 euros in Catalonia, the Valencian Community, the Basque Country and Navarra; 325,000 euros in the Community of Madrid.
The difficulty for the majority of young people in accessing guarantees lies in the fact that “the granting of the mortgage, with or without guarantee, always depends on the banks’ risk criteria“, indicates the director of Mortgages of the comparator iAhorro, Simone Colombelliso “for a financial institution to grant a mortgage, it is very important that the client or clients do not exceed the debt ratio recommended by the Bank of Spain, that is, that they are not going to pay more than 30 or 35% of their monthly net income in mortgage payments, including the amortization of the loan and its interest.”
Another factor to take into account is that the interest rates of mortgages that finance 100% of the price of the home they are taller than average market interest rates. Therefore, “although we can now see fixed mortgages below 3% TIN, people who request a mortgage and the ICO guarantee will surely obtain much higher interest rates, even 4% TIN or higher”says Colombelli.
All this makes the mortgage payments that the beneficiaries of the ICO guarantee would pay for the maximum amounts set by this body in each autonomous community would be 843.21 the lowestprovided that the bank grants a mortgage of 200,000 euros at 3% TIN, and the highest of 1,551 euros for a mortgage of 325,000 euros at 4% TIN.
Another factor to take into account is the minimum family unit income for the bank to grant them the mortgage loan, which must be around between 2,409 and 4,433 euros net per month, depending on the amount and interest rate of the mortgage contracted. However, in order to access the ICO guarantee, the Government has established a maximum salary of 37,800 euros annual gross or, what is the same, 2,360 net euros per month in 12 payments. Therefore, according to iAhorro, in the event of buy alonethe future mortgage holder will not be eligible for a loan of 200,000 euros or more and will have to look for a home whose price is lower.
This changes if the home is bought by a couple, since having the salary of both, the options are greater because, at mostthe family unit may have income of 4,720 euros monthly net, an amount with which I could even pay the mortgage of 325,000 euros at a 4% TIN.
All this makes the necessary salary to qualify for a mortgage of 275,000 euros guaranteed by the ICO, with a repayment period of 30 years and an interest rate of 3.5%, allocating 30% of the income, It would be 4,116 euros, or what is the same, in case of buy as a coupleeach person should have a minimum salary of 2,058 euros, point out from iAhorro, when the average salary in Spain is 2,243 net euros per month on average. So in general terms, only 45% of buyers could afford 100% of a mortgage for an initial amount of 275,000 euros, with a term of 30 years and a fixed rate of 3.5% TIN.
“The situation would improve a little in places where housing prices are lower, but it would worsen in places where they are higher. Furthermore, one of the most typical responses of banks when granting a 100% mortgage is raise interest rates in case the operation had some other risk, which would lead to even worsening access to this aid,” Colombelli says.
Those under 35 years of age, whose salaries reach an average of 1,615 euros monthly net, they have it more difficult, but in the case of buying as a couple, the average salary of the family unit would rise to 3,230 euros. Of course, it must be taken into account that this average salary is 41% lower in the youngest age groups (18 to 25 years old) and 20.5% lower in those closer to 35 years old. Therefore, of all the young people who could access an ICO guarantee in Spain, only for income, already 78% of the total would be excluded from this aid, that is to say only 22% of those under 35 years of age could have access to ICO guarantees for the purchase of their first home without any other type of additional guarantee, as long as they mortgaged with another person, iAhorro explains.
If buying alone, young people who earn a few average income of 1,615 euros net per month they could not pay more than 565 euros per month of mortgage and, if the bank were more flexible with the debt ratio, at most, they could pay 646 euros in installments. Therefore, in this case, They would not be eligible for ICO guarantees unless they buy a home cheaper than the maximums set by the Government in each autonomous community, of around 135,000 euros, or increase their monthly net income.
On the contrary, in case of buy as a coupleadding the income of both members, Yes, they could qualify for a mortgage of up to 250,000 euros with an interest rate of up to 4% TIN, as long as they allocate 35% of their monthly net income to pay the fee. And, if the bank allowed them to increase their debt ratio to 40%, they could even face a 30-year mortgage of 275,000 euros with a 3.5% NIR.
However, Simone Colombelli warns that “Over-indebtedness carries many risks. because, in the event that one of the members of the couple loses their job, they would no longer be able to pay the mortgage and the bank could even take away their house if they consider it so.”
