Eligibility requirements for the 20% ICO guarantees for the purchase of first homes

The Spanish government has just approved a measure to support young people and families with dependent children in the purchase of their first home. It consists of guarantees of 20% of the mortgage that will be covered by the State through the ICO. This initiative is aimed at facilitating access to the financing necessary for the purchase of a first home within the national territory to citizens who do not have sufficient savings. The Government expects to facilitate the purchase of approximately 50,000 homes.

To whom it is addressed

The guarantees are aimed at young people up to 35 years of age and families with dependent minors with an individual income of up to 37,800 euros gross per year. In the event that the home is purchased by two people, the income limit will be doubled. The measure has improvement factors depending on the number of children and whether the family is a single-parent family. Thus, the limit will be increased by 0.3 times the IPREM (2,520 euros gross per year) for each dependent child and, in the case of a single-parent family, the limit may be increased by an additional 70%.

Limits for accessing ICO guarantees

• Families with three children: income equal to or less than 83,160 €.
• Families with two children: income equal to or less than 80,640 €.
• Families with one child: income equal to or less than 78,120 €.
• Couple: income equal to or less than 75.600 €.
• Single: income equal to or less than 37,800 €.

Beneficiaries may apply for the guarantee through the financial institutions that operate the ICO Mediation Lines. The loan to be guaranteed with the line may be up to 100% of the lower value between the appraisal value and the purchase price of the house and the cost of the guarantee granted by the Ministry will be assumed by the credit institution. The term of the guarantee granted by the Ministry will be for a maximum of 10 years, regardless of the loan repayment period and whether or not there is a grace period.

Benefits for energy efficient housing

It is important to note that if the property to be purchased has a minimum energy rating of D or higher, the Ministry may guarantee up to 25% of the loan principal. In addition, the Government may establish a maximum limit on the sale price or appraisal of the property depending on the territorial scope.

Risks assumed by the buyer

Generally, banks only finance up to 80% of the purchase price of the property in question, which requires the buyer to contribute at least 20% of the transaction via savings. These guarantees are intended to offer buyers who do not have these savings the possibility of accessing a mortgage. However, in practice, this measure does not solve the problem but postpones it, since what it implies is that the buyer will be incurring in an excess of indebtedness, on the one hand the bank and on the other the State.

In the event of non-payment, it will be the State who will pay 20% to the bank and, subsequently, this same State will act against the debtor to claim the amount borrowed, the accrued interest and the costs of the judicial process, if applicable.

In short, this is a measure whose intention, presumably, is to help those who have no previous savings to buy their first home. The measure is temporary and has a series of conditions that will be established in the guarantee contract to be formalized between the ICO and the credit institutions, in accordance with what is regulated in the Agreement to be formalized between the ICO and the Ministry.

From Valido Home we always recommend that the buyer seeks professional advice so that, in addition to buying a home without hidden problems or financial burdens, he/she is sufficiently advised on the real economic effort that he/she is going to acquire. If you are about to buy a house do not hesitate to contact us. Our professionals in real estate law will guide you at all times and will give light and transparency to the small print that can become a real headache tomorrow. Contact us without obligation!