Everyone who has bought a home knows the uphill path that starts with picking the right house, moves through the mortgage application, and ends with the turn of a key. Even in its simplest form, each stage demands decisions that shape a person’s future. And often, extra help is needed to meet all payments, which is where ICO guarantees come into play.
Recently, the government approved a plan meant to benefit tens of thousands of young people and families. It centers on credit lines aimed at individuals up to 35 years old or households with minors. Access hinges on meeting several requirements, with annual income caps as a key limiter. Under this scheme, beneficiaries can cover up to 20% of the total mortgage, the portion not financed by banks.
During a rally, the prime minister outlined the plan: a 2.5 billion euro line of guarantees to help young people and families secure the down payment needed to buy a home and obtain a mortgage. This down payment has historically posed a barrier to homeownership for many households.
Eligibility for ICO-backed credits
- Applicants must be 35 or younger or belong to a family with dependents.
- Annual income cannot exceed 37,800 euros.
- For joint applications, the combined income cap remains at 75,600 euros.
- Families with minors see the per-child limit raised to 2,520 euros.
- Single-parent families may push the cap up by 70%, reaching 64,000 euros.
- The guaranteed assets must not exceed 100,000 euros.
What are ICO credits? They are loans offered by the Official Credit Institute intended to boost economic activity and support businesses and self-employed individuals. They come with favorable terms, including competitive rates and repayment schedules. Funds can be directed to various sectors, including investment, liquidity, and sustainable projects. This form of financing has an important role in economic crises by providing stability and supporting growth within Spain.
Individuals looking to buy a home cannot apply directly for ICO loans. The ICO coordinates funding with financial institutions, which in turn issue mortgage credit to interested buyers. Applicants must approach a bank to verify that they meet certain criteria, such as stable enough income to cover the mortgage, no significant debt with public authorities, and some savings for the down payment. Applicants should also be aware of several potential drawbacks associated with these loans.
Drawbacks of ICO credits
Higher Total Repayment Amount
Even though the state backs 20% of the mortgage, that backing is not a subsidy. The borrower still repays the entire loan, and interest is calculated on a larger principal, leading to a notably higher overall cost over time. This increase can amount to thousands or even tens of thousands of euros in extra payments across the life of the loan.
Costs Related to Purchase and Mortgage
Even with an added guarantee, the buyer typically covers about 10% of purchase and mortgage-related costs, including taxes and often life insurance. Prospective borrowers should have savings ready to cover these upfront expenses.
There are also additional considerations to weigh. The guaranteed loan often brings stricter conditions from lenders, which can include tougher solvency tests or more stringent requirements for borrowers.
Restrictions on the Guaranteed Amount and Use of the Home
While not all details are public, a cap on the guaranteed amount is anticipated, and it may vary by the property’s location. During the guarantee period, typically up to ten years, the buyer should use the home as a primary residence and face strict rules about renting it out except in specific scenarios like marriage, separation, or job relocation.