Although the main purpose of mortgages is to facilitate the purchase of a home, many people find it difficult to qualify for one. This is mainly because these loans typically cover only 80% of the property’s total value, which means the buyer must contribute the remaining 20% at the time the deal is closed. On top of that, another 10% is needed to cover all the costs associated with the sale.

In short, anyone who wants to buy a new home today knows that they must have saved at least about one-third of the total cost to be able to finance it with a mortgage. This is a large sum of money that not everyone can save these days, which therefore makes renting more appealing than buying.

In light of this situation, the government has recently launched its ICO Mortgage Guarantee Program. This measure aims to make it easier for young people and families with dependent children to purchase their first home.

Want to know what it is and how to apply? Keep reading!

What Are ICO Mortgage Guarantees?

Last May, the Council of Ministers approved a guarantee program designed to cover 20% of mortgages for the purchase of a first home in cases where certain requirements are met. These guarantees make it easier to obtain these loans by covering 100% of the home’s value, which eliminates the need to have savings equivalent to 20% of its value: instead, borrowers will only need to provide an initial down payment of 10–12% to begin the application process.

What are the requirements for ICO mortgage guarantees?

To apply for one of these government guarantees provided through the Official Credit Institute (ICO), you must meet at least one of the following two requirements:

• Be under 35 years of age.
• Having dependent children in the family.

In addition, if the applicant or applicants fall into one of these groups, they must also provide proof that:

• The stipulated income limit is not exceeded: 37,800 euros gross annually if the purchase is made individually, or twice that amount (75,600 euros) if purchased as a couple. In addition, 2,520 euros gross is added to this limit for each dependent child; for single-parent families, the limit increases by up to 70%.
• Assets do not exceed 100,000 euros.
• The applicant has been residing in Spain for at least two years prior to applying for the loan.
• The mortgage is intended to finance the purchase of a first home that will also serve as a permanent residence.

How much will the ICO guarantees contribute toward mortgages?

As we have already noted, this government subsidy will amount to 20% of the property’s value in most cases, although it may be increased to up to 25% of the cost if the home to be purchased has at least one energy efficiency rating of D or higher. The aim is to encourage the purchase of sustainable and highly energy-efficient homes.

In this regard, the provision stipulates that the ICO shall assume these percentages of the risk associated with the total principal amount of each mortgage with the lending institution, under the same terms and conditions.

What will be the term of the ICO guarantee issued by the government?

Its term will be a maximum of 10 years, regardless of the repayment period agreed upon with the bank and whether or not there is a grace period.

Is there a deadline for submitting the application?

Once this regulation takes effect, individuals interested in obtaining one of these ICO mortgage guarantees must submit their application by December 31, 2025. However, it will be possible to request a two-year extension, depending on demand and the individual’s financial circumstances.

ICO Mortgage Guarantees, Complementary to Other Regional Measures

Beyond the obvious advantages of this government-sponsored measure, it is worth noting that it is fully complementary to other guarantees and public assistance programs offered by the autonomous communities to facilitate access to mortgages.

For example, in the case of the Community of Madrid, the 20% guaranteed by the government is added to the 15% already guaranteed by the “My First Home” program under similar conditions, reaching 35% of the property’s total cost. Meanwhile, in Catalonia, reductions in real estate transfer taxes will mean that the buyer or buyers will not need to have savings equivalent to 10% of the total cost in order to cover the transaction costs.

How much money will be allocated to this ICO mortgage guarantee program?

To implement this measure, the government is allocating 2,500 million euros through the ICO. As a result, the initiative is expected to help nearly 50,000 families across the country, enabling those without prior financial resources to gain easy access to the mortgage market.

If these estimates ultimately prove accurate, the average ICO guarantee for home purchases will be 50,000 euros per applicant. This means that the average value of the home that applicants can expect to purchase will be 250,000 euros.

Can these ICO guarantees be used for any mortgage?

In principle, no, because this measure depends on the government reaching an agreement with the banks so that they will accept the guarantees. However, most of them are expected to join the initiative, as indicated by the preliminary meetings that have taken place among all the parties.

Will obtaining one of these ICO guarantees lead to higher mortgage costs?

It remains to be seen whether this measure will affect the offers made by banks that decide to operate through the ICO’s mediation programs. The only thing that is clear is that the maximum amount of state-backed mortgages cannot exceed 100% of the value of the financed home (taking the lower of the purchase price and the appraised value).

However, it is important to keep in mind that with an ICO guarantee for mortgages , the amount the bank will lend us will be higher. This will have a direct impact on both the monthly payment we’ll have to make and the total interest we’ll have to pay.

In fact, the website “Kelisto.es” estimates that a mortgage with the aforementioned guarantee will cost a total of 25% more than it would without it. This could mean an increase of 232 euros per month in payments and an additional 19,581 euros in interest for a 250,000-euro loan with a guarantee (200,000 euros without a guarantee).

How can you apply for an ICO mortgage guarantee?

If you meet the requirements outlined above and want to make it easier to qualify for a mortgage to purchase a home that you’ll use as your primary residence, you should know that applying is extremely simple. All you have to do is contact a bank that has joined this program, and the bank will not only start the entire process but will also explain the new terms and features of its mortgage offer linked to the ICO guarantees.

We recommend:

• How to Save for a Home
• Housing Law: Everything You Need to Know About the New Law That Is Revolutionizing the Market