The purchase of a home by young people is almost a mirage. On the path that would lead them to meet this objective there are two major insurmountable obstacles: rock-bottom salaries and low savings capacity, which severely limits them when it comes to requesting financing to acquire a property to establish their home. In this way, at the end of 2019, less than 4 out of 10 Spaniards under the age of 30 lived in a home they owned or paid a mortgage, according to the Youth Emancipation Observatory of the Spanish Youth Council. However, despite the problems it suffers, this public is attractive to banks, since these, through mortgage loans, seek to attract new customers who stay for a very long period of time, until the complete extinction of the debt. For this reason, some entities promote mortgages designed especially for young people.
As a general rule, the age limit to request them is set at 35 years. It is possible that, once this threshold has been exceeded, the bank will sell the customer associated products —such as insurance, payroll direct debit or subscription to a pension plan— in exchange for some type of added bonus, as long as the signing of the loan has been prior to this moment. “Although this type of client does not have large savings or is not in the best professional moment of his life, when contracting the mortgage the entity ensures a new client practically for life from which to obtain profitability”, explains the director of Mortgages of the iAhorro banking comparator, Simone Colombelli. For this reason, she adds, “it is common to see more links associated with the mortgage in this type of profile, in some cases up to six”.
Ignoring the economic situation in which this public finds itself is impossible. “Entities must differentiate their product by focusing on the lower savings generated by young people and, therefore, the lower capacity to meet both the expenses related to the purchase of the home and the previously available part of the financing”, says the president of the National Association of Real Estate Agents, Vicenç Hernández Reche. For this reason, “they offer the possibility of agreeing on deficiencies in which only interest is paid, delaying the return of capital, loans with a repayment term of up to 40 years and, above all, financing that exceeds the usual maximum of 80 %, without the need for pre-existing savings of 30% of the cost of the operation”, summarizes Hernández. In fact, “among the entities that offer these loans, there are some that cover up to 95% of the value of the property, with very competitive interests,” Colombelli underlines, along the same lines. There are also cases in which certain commissions are eliminated, such as opening or early repayment.
On the other hand, to achieve interest rates that are not very high, the requirements will be more demanding. “Given the impossibility of proving a certain job seniority in many cases, professional and employment links to certain sectors that can be considered more reliable, such as being a civil servant or working in new technologies, will be valued,” says Hernández. Colombelli emphasizes that “it is also common to use the figure of the guarantee as an extra guarantee for the bank against a possible risk of non-payment of the mortgage installment”. In his opinion, an alternative to improve credit conditions would be to “put it in the name of several holders.”
Not a very abundant offer
In any case, not all entities promote mortgage financing products specifically designed for young customers. Most of them have “an offer that is personalized according to the profile of the applicant, regardless of their age,” says Hernández, who attributes the shortage of mortgages for young people to other factors, such as “the process of concentration of financial entities that has been taking place in Spain; the very deep real estate crisis suffered since 2008, which forced authorities and banks to adopt criteria of prudence to mitigate delinquency, which directly affected both the percentages of financing and the increased rigor in the criteria of solvency and repayment of the loan ; and the fact that, in a context of health emergency derived from the pandemic, youth employment was particularly affected”.
Even so, examples of products of this type on the market are not lacking. This is the case, among others, of Kutxabank, whose young mortgage has a nominal interest rate (TIN) of 1.45% the first year and 0.79% plus Euribor from the second year until the holder turns 35 , as long as you accept the linked products offered by the entity. From that moment on, a TIN of 0.89% plus Euribor will be applied. The result will be an equivalent annual rate (APR, that is, an interest rate in which the other expenses and commissions are also taken into account), equivalent to 1.78% variable. This rate drops to 1.59% if the client does not subscribe to the linked products, but, in this case, from the second year, they will have a TIN of 1.79% plus Euribor until they are 35 years old, and 1.89 % plus Euribor for the remaining time.
Another example highlighted by iAhorro is that of Caja Sur. This entity cuts the interest rate differential on its mortgage loan for young people by one tenth of a percentage point, until the user turns 35. If you agree to discount the fee through the contracting of associated products, you will obtain a variable APR of 1.75%. If not, this will be 1.58%.