The Government announced a few weeks ago that it will guarantee the mortgages of young people and families with children so that they can finance the purchase of up to 100% of a house or an apartment. With this measure, the Executive intends to improve access to housing for these groups, who currently have difficulties in contracting a mortgage loan because they do not always have the necessary savings to obtain bank approval.
To access these aids, however, certain requirements must be met, such as being part of the aforementioned groups and charging a maximum of 37,800 euros gross per year per applicant. There will be many people, therefore, who will not meet these conditions and will not be able to take out a mortgage if they do not have the savings that banks usually require to grant financing.
And how much money should be saved exactly? According to the financial comparator HelpMyCash.com, in the vast majority of cases, the future buyer must have sufficient own funds to cover the taxes associated with the purchase of the home, the different formalization expenses and, also, the part of the price of the property that is not financed with the mortgage.
The item that must be paid by all future mortgages, including those that take advantage of the Government guarantee, is that of the taxes and expenses associated with the purchase of the home. In the case of taxes, the taxes to be paid will depend on the type of property that is acquired: the value added tax (VAT) and the documented legal acts tax (IAJD) if it is a new construction and the onerous property transfer tax. (ITP) if it is second-hand.
The cost of VAT is 10% on the price of the house (in the Canary Islands the IGIC is paid, which costs 6.5%). The IAJD, for its part, can be between 0.5% and 1.5% depending on the autonomous community in which the property is located, and is calculated on the reference value of the house or flat, that appears registered in the General Directorate of the Cadastre. As for the ITP, it is also calculated on the reference value and its type is between 4% and 10% (depends on the autonomous community).
Likewise, the mortgage applicant must have sufficient savings to pay the appraisal of the home to be acquired and the notary, registry and agency expenses associated with the formalization of the sale. On average, according to HelpMyCash, the total bill for these costs is usually around 2,000 euros, although it may be less or more depending on the value of the property.
In general, to deal with all these items, banks usually ask the applicant to deposit a certain amount of money in a checking account before making the purchase: this is known as the provision of funds. The amount of this provision is, in most cases, equivalent to between 10% and 12% of the price of the home. Therefore, if you want to buy a house of 200,000 euros, you will have to enter between 20,000 and 24,000 euros.
It must also be borne in mind that banks do not usually finance the full price of the home that is intended to be purchased. As a general rule, up to 80% of the sale or appraisal value of the property can be covered with their mortgages, so the applicant must pay the remaining 20% with their savings. That 20% is usually called input.
For example, let's say that a person needs a mortgage to buy a house of 200,000 euros. To pay for the ticket, you must have saved 20% of that amount, which is 40,000 euros. And the total savings that you will have to contribute to complete the operation, if we add the taxes and sales expenses, will amount to between 30% and 32% of the value of the property: between 60,000 and 64,000 euros.
With the guarantee announced by the Government, precisely, the bank could cover up to 100% of the purchase by having more payment guarantees, so the buyer would not have to contribute the 20% down payment (although he would have to pay the taxes and sales expenses). This measure is already applied in certain autonomous communities, in which young people can finance up to 95% or 100% of the operation: the Community of Madrid, the Balearic Islands, Murcia, Galicia...
One way to reduce the contribution of savings, therefore, is to apply for one of these public guarantees, provided that the requirements to benefit from them are met. And in case you are not entitled to this aid, from HelpMyCash they affirm that you can negotiate directly with the entities so that they finance more than 80% of the purchase, although they will only accept it if the applicant has a good economic profile.
The negotiation, in this sense, may have more chances of success if the mortgage application is entrusted to a broker or mortgage intermediary. These professionals, due to their extensive knowledge of the financial market, know which banks are more willing to lend more than 80% of the price of the home. Therefore, they tend to get the approval of the operation more easily.
