High housing prices are an obstacle for many buyers in the modern Spanish market. For example, according to the real estate portal Fotocasa, the average price per square meter of living space put up for sale in February of this year was 2,086 euros. This is 9.9% more expensive than a year earlier.
At this price, a typical apartment for the market with an area of 80 square meters will cost the buyer about 166,880 euros. A year earlier, it was about 150,400 euros. Even when applying for a mortgage loan to buy such an expensive object, many potential buyers of real estate today often do not have enough savings even to cover the down payment.
And this is not to mention the fact that banks, as a rule, are at best ready to cover 80% of the value of real estate. That is, in addition, the buyer will have to find money somewhere else to pay for the remaining 20% of the purchase price. This is all in excess of the costs of the loan itself and fees for the purchase of real estate. Plus, let's not forget that the loan must be paid together with payments for regular utility expenses. And they are also getting more expensive month by month.
In general, the situation is not easy, but you can always cut corners somewhere. Let's say the buyer still found a sufficient amount of funds for all these expenses and is ready to take a risk — what can he save on? The most important way may be to search for mortgage loans with 100% purchase coverage. It is rare and quite risky. Nevertheless, the saved 20% of the house price can tip the scales in favor of this tool.
What is it about? Some financial organizations, depending on the profile of the buyer and the specific situation, are ready to issue loans with 100% coverage of the price of a particular housing. Fotocasa experts point out that this is possible, for example, in the case when you are going to buy a house from a bank.
Banks regularly have entire portfolios of various housing objects that they got from mortgage borrowers who declared themselves bankrupt. Banks do not need this housing, they want to get rid of it as soon as possible, so they are ready to offer potential buyers below-market prices and loans at 100% of the cost.
Another situation is if the borrower is a government employee. If two such people in one or another position related to state-owned enterprises apply to the bank for a 100% loan, they have a great chance to get it. Two people are needed for surety, and the fact that people work for the state guarantees them more stable employment and income, and therefore the opportunity to pay off the loan than private sector workers.
Another option is additional guarantees from the borrower, such as mortgaging your second home as a guarantee in case of non-payment of the loan. For example, you inherited an old house. You don't need it, you can sell it or use it as an additional guarantee.
If the buyer managed to negotiate the purchase of housing at a price below its estimated value. Banks issue their loans at 80% on the estimated value of residential real estate. Therefore, if the apartment was bought for 100,000 euros, and a mortgage loan was opened for 130,000 euros at 80%, then this means that the bank issued 104,000 euros to the person and, in fact, covered 100% of the purchase price.
You can also turn to the services of a mortgage broker - a specialist who knows this market well and has the means to find you the rarest offers with a coverage percentage above 80. However, such a broker takes from 1% to 5% of the loan amount for their services.
What are the risks of these mortgages?
Although getting a 100% mortgage loan allows you to save on buying real estate, this type of loan carries great risks. The interest on the debt is higher, as well as the amount of regular payments. The term is usually longer, up to 35 years or even more. Such loans are also quite vulnerable to instability in the mortgage market.