“Government Mortgage Guarantee: Accessible Assistance for First-Time Homebuyers and Possible Consequences”

For provide assistance for the first homethe Government will grant, through the ICO, a guarantee that will cover 20% of the total mortgage loan. apply for a mortgageIn this way, it would become much more accessible. Today we review the measure and tell you the possible consequences of the endorsement for government mortgages.

What is the guarantee for government mortgages?

Las mortgages for habitual residence They usually cover, at most, 80% of the appraised value of a home. This means that there are two amounts that the applicant must contribute with their savings:

• He 20 % remaining that the bank does not grant.
• And 10 % extra expenses related to the purchase (taxes, real estate expenses, notary…).

In this context, the government mortgage guarantee It will solve the first of the problems by acting on that 20% that the bank does not usually grant. In this way, the applicant will obtain 100% of the mortgage. But beware: an endorsement is not a grant. That the Government guarantees you means that, if you do not pay that 20%, it would, but then you would also contract the debt with it.

So, a guaranteed mortgage loan It must be paid in full by the applicant. The 20% guarantee helps with the lack of savings, but not income. Even if you haven’t had the chance to save that 20%, you do have to have the ability to pay it back. And even so, we have already seen that there is still an extra 10% of expenses derived from the purchase, which the applicant must contribute with his savings.

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Who will benefit from the government mortgage guarantee?

Have the income, but not the savings necessary to face a mortgage: nobody responds better to this profile than the youths. Indeed, and although there are already plans to young mortgagesthey are the main recipients of the guarantee, but not the only ones:

• If you have less than 35 years and your gross income is less than 37.800 € a year (or double if you are going to request a shared mortgage), you are one of the beneficiaries of the guarantee.
• But you also are if, even if you are over 35, you have minors in your care and, again, your annual gross income is less than 37.800 €.

You must bear in mind, on the other hand, that the guarantee will not be available for all homesbut for those that do not exceed the maximum value set by each autonomous community.

And what consequences will the government endorsement have?

These kinds of measures always have two levels of affectation: one concrete (about the applicant) and one general (about the market). The best thing, therefore, will be to separate the consequences of the guarantee for government mortgages in different sections.

Consequences of the endorsement for the applicant

The main one is, after all, the direct objective of the measure: it will be will open the door from the real estate market to many young people and families with children. The Government anticipates that some 50.000 familiesfor which it will allocate 2.5 billion to the measure.

Once they have signed their Mortgages with the guarantee of the ICOthe beneficiaries will find some higher odds than an 80% mortgage. We will not get tired of repeating it: the 20% that the Government guarantees must be paid by the applicant, so it is logical that, if the amount borrowed is higher, so are the installments. To get an estimate, use our mortgage expense simulator.

Consequences of the government guarantee for the market

The affirmations, here, cannot be more than hypotheses or forecasts. In 2013, the United Kingdom applied similar purchase aid policies, and mainly these three consequences have been appreciated:

• more have been built housing stocks.
• prices have increased of the house under construction.
• Construction has been limited, above all, to areas with not very high quality of habitability.

All this is explained by the law of offer and demand. Thanks to aid such as the guarantee of the Government, the demand grows, but not in proportion to the supply, which is why it becomes more expensive. In addition, to respond to the high demand while keeping costs as low as possible, English builders opted for cheaper and less desirable areas.

Even so, neither the British real estate market is the Spanish one, nor the laws that govern it or the measures that affect it are the same. there is nothing left but wait to see the true consequences of the guarantee for government mortgages.

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Get your mortgage with Housfy

If you cannot access the guarantee of the Government and you are fed up with compare mortgages without finding the one that suits you, what are you waiting for to contact our mortgage brokers? In Housfy Mortgages You will have a team of professionals who will help you get the financing you need and with the conditions that suit you.