2024-01-03 07:33:27
Young people pass in front of a real estate agency in Guernica, Basque Country. REUTERS/Vincent West
The tightening of the conditions of banks to grant mortgage loans makes getting a mortgage that finances 100% of the purchase of a home an almost impossible mission, but there are still banks that match them, yes, only to the chosen.
Most banks require home buyers to have at least a down payment that covers 20% of the purchase price or appraised value of the property. This entry fee is on average around 42,000 euros in Spain in the case of a two-bedroom apartment, to which 10% must be added to cover the expenses generated in the purchase process.
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“The entry conditions for applying for a mortgage loan are, given the current circumstances, very demanding for the majority of buyers. This has caused, to a large extent, that more and more Spaniards have to resort to the rental market,” says the Director of Studies and spokesperson for apartments.com, Ferran Font.
These difficulties contrast with the ease that existed before the burst of the real estate bubble, when it was “relatively easy” to get banks to lend all the money necessary to buy a house, explains Estefanía González, personal finance spokesperson for Kelisto. Remember that, even, “they offered 100% mortgages plus expenses: that is, they left you the money that your future house cost, plus an extra to pay taxes, incorporation expenses and even the reforms that you wanted to make.”
Despite these impediments, 100% mortgages can still be found as long as the future buyer has a solvent profile in the opinion of the bank. That is, they have a stable job, high income, seniority at work and not many outstanding loans.
“The bank will also ensure that the 100% mortgage payment does not represent more than 35% of the applicant’s income,” says Miquel Riera, mortgage expert at HelpMyCash.
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Another factor that facilitates access to mortgages without entry is that the home is purchased from a bank because they still have a very high stock of properties from foreclosures and want to get rid of them.
This circumstance “has caused some entities to carry out aggressive campaigns to reduce the price of real estate, while at the same time granting financing on preferential conditions to their clients, that is, low interest, repayment terms that exceed 30 years and the possibility of get mortgages with 100% financing,” says Estefanía González.
Just because they are the most common does not mean that all mortgages for bank apartments are 100%, remembers Riera, so “if you are interested in one of these properties, we advise you to first ask the owner entity how much money they will lend you. It is also recommended that you visit the home before deciding and check that it is in good condition.”
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Another circumstance that facilitates access to mortgages without a down payment is that the buyers are young and can take advantage of the public guarantees offered by some autonomous communities. If certain requirements are met, some administrations can guarantee up to 20% of the mortgage, which can finance up to 100% of the purchase.
But not only the autonomous communities, the Government has also announced the ICO guarantees, which will allow young people and families with dependent minors to obtain a 100% mortgage. But, according to Riera, “this measure is not yet regulated and, therefore, cannot be requested.”
Banks are also more inclined to finance 100% of the home when the buyer provides additional collateral, such as a guarantee or other property. In these cases, experts advise that before opting for this route, the buyer negotiates with the bank so that when the outstanding capital represents less than 80% of the initial appraisal of the home, the guarantee is automatically cancelled.
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Hiring the services of a mortgage broker also helps to obtain these loans because “they know in depth how the real estate sector works and they know which banks to go to to get 100% mortgages with the best conditions,” says Riera. Of course, in most cases you have to pay for their services, between 1% and 5% of the capital of the loan you obtain.
Obtaining these mortgages does not always have advantages, they also generate disadvantages. Among the first, it stands out that it facilitates access to housing for those who have the capacity to borrow, but not enough savings, and also leaves them room to pay other expenses, such as a renovation; and allows flexible conditions to be obtained if the property is purchased from a bank.
But they also have disadvantages such as their high cost, over-indebtedness, risk of default, since the debt generated with the bank is very high, or “the risk that they could become bubble mortgages,” warns González.
The risk of default generated by this type of mortgage means that few banks grant them. Among them are Unicaja, Banco Santander, Ibercaja, Kutxabank, imagin, Bankinter and Pibank. They all have fixed, variable and mixed rate offers.
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“Ibercaja is the only one that sells the three modalities, Pibank only has a mixed rate proposal and the rest offers fixed and variable rate loans, except for imagin, which sells a 100% fixed mortgage and a mixed one,” explains Estefanía. Gonzalez.
The interest charged on these loans varies depending on the type and the bank. They range between 2.80% and 4.25% at a fixed rate; between Euribor+0.49% and Euribor +0.79% at a variable rate, and in the case of 100% mixed mortgages, their interest ranges between 2.4% and 2.99% for the A tranche fixed rate, and Euribor +0.75% and Euribor +1.10% for the variable tranche.
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