100% financing for young people in mortgage credit: How does it work?
Young people can apply for 100% financing to purchase a house with a mortgage loan, through the public guarantee measure.
What are the terms of the public guarantee for young people buying a house with 100% financing?
Young people can turn to 100% financing in housing credit, through public guarantee to buy a house from the beginning of 2025.
About the requirement conditions, the regulation establishes: It is intended for young people between 18 and 35 years old, with a tax address in Portugal, incomes up to the 8th bracket of the IRS, not being able to own another residential property, and for properties up to 450 thousand euros.
It is worth remembering that the public guarantee of the State in question is on 15% of the transaction value, allowing banks to finance the full value of the property. The guarantee in question is provided by the Directorate-General of the Treasury and Finance (DGTF) to banks.
Young people who adhere to the guarantee can benefit from it for 10 years, starting from the celebration of the credit contract, extinguishing the obligations of the borrower that are fulfilled before this deadline. Note that if the credit is partially or fully amortized, the guarantee is also reduced in the same proportion.
In other words, if in default, the state can also be called to pay up to 15% of the outstanding capital, which will then be subrogated in the bank's rights to recover the amount from the borrower.
Despite this measure bypassing the Bank of Portugal's macroprudential measure regarding the maximum financing limit of 90% for the acquisition of own and permanent housing (the lowest among the acquisition or appraisal value), the banks still have to follow the other rules.
For example, they must continue to respect the limit of the debt service-to-income ratio, which determines that the total amount of credit installments must not exceed 50% of the borrower's net income, except in exceptional cases.
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