The Government has announced a new initiative aimed at supporting young people and families in Spain in the acquisition of homes, through the guarantee of 20% of the mortgage and the possibility of obtaining up to 100% of the mortgage loan. This measure, called Línea Mitma-ICO, was approved on May 9, 2023 in the Congress of Ministers. With this action, young people would have the option of jointly financing the down payment for the home together with the mortgage, in addition to covering the taxes corresponding to the purchase and sale, which usually represent approximately 10% of the value of the home. It is worth mentioning that this measure is similar to those already implemented by Autonomous Communities such as Madrid, Murcia or the Balearic Islands for the benefit of their citizens. The main objective of this initiative is to speed up the acquisition of around 50,000 homes.

How does the Government's 20% guarantee for the purchase of a house work?

The Mitma-ICO Line implies that the Government will act as guarantor of the mortgages, covering up to 20% of the part not financed by the bank, through a line of guarantees from the Official Credit Institute (ICO). It is important to bear in mind that this is not a subsidy, but a guarantee on a part of the mortgage. This means that we can obtain up to 20% more mortgage financing thanks to the guarantee offered by the Government, which would allow us to apply for a 100% mortgage and repay the total loan, including the 20% guaranteed.

Banks generally approve loans of up to 80% of the value of a home, which means that buyers must contribute 20% of their savings for the purchase. However, with the backing of a guarantor of up to 20%, the bank may grant a loan of up to 100% of the cost of the house, thus reducing the amount that the buyer must contribute from his savings to a range between 10% and 12% to cover the corresponding taxes.

What are the requirements to obtain the guarantee for the purchase?

1. Be under 35 years of age, inclusive, at the time of purchase.

2. Or be a family with dependent minor children, regardless of the age of the children.

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3. Have an income of less than 37,800 euros per person per year.

4. In the case of two buyers, the joint income limit is 75,600 euros per year.

5. In the case of families, an additional 0.3% of the IPREM per child will be allowed, equivalent to 2,520 euros gross per year, which adds up to a maximum of 78,120 euros gross per year for one child.

6. For single-parent families, an additional 70% of the IPREM will be allowed, corresponding to 5,580 euros gross per year, which adds up to a maximum of 43,680 euros gross per year for one child.

7. Residing in Spain and having a DNI (National Identity Document) or NIE (Foreigner's Identification Number).

8. To have an income and financial profile that allows you to apply for a mortgage.

9. The home to be purchased must not exceed the maximum price stipulated in each aid program, which will be determined by the corresponding Autonomous Community.

10. The property to be purchased must be the first home and must be used as a habitual residence.

What documents are required to obtain a government guarantee when buying a house?

Although the exact procedures have not yet been published, they are likely to be similar to those required by other autonomous communities for similar aid programs. The possible documents to be submitted are as follows:

1. National Identity Document (DNI) or Foreigner Identification Number (NIE), which proves that we are under 35 years of age.

2. Family book that certifies the existence of minors in our care.

3. Certificate from the Cadastre confirming that we do not own any property.

4. Affidavit stating that we will use the home as our primary residence.

In addition, the bank where we apply for the mortgage will request the necessary documentation to verify that we meet the requirements to contract the financing. These documents may include:

Copies of the last three paychecks.

2. Current employment contract.

3. Deposit contract (if applicable).

4. Personal Income Tax Return (IRPF) for the last year.

5. Updated employment history.

What happens in the event of default on the government-backed mortgage?

In order to apply for this assistance, it is necessary to comply with the requirements established by the bank to access the mortgage. However, if for some reason there is a default on the mortgage, there are different procedures to follow.

In the event that the non-payment affects the 20% guaranteed by the Government, the Government will act as guarantor and will be responsible for paying the bank as guarantor. According to research carried out by Fotocasa, in accordance with article 1838 of the Civil Code, the guarantor has the right to claim the debt paid from the mortgagor, in addition to the corresponding legal interest.

If the default occurs after having repaid the portion guaranteed by the Government, in that case the responsibility to repay the money will fall on the mortgage holders (or, if applicable, on the guarantor if the bank has requested an additional guarantee for the remaining 80% of the mortgage).

Source: Fotocasa