Youth Mortgage: 100% Financing for Your First Home
The Portuguese real estate market has been one of the greatest challenges for the younger generation. With constantly rising housing prices and relatively low wages, purchasing a first home has become a difficult goal for many.
The government, aware of this reality, launched new measures to facilitate access to housing, including Decree-Law 44/2024, which enables young people to access 100% financing for their first home purchase.
Legal Framework
Decree-Law 44/2024, dated July 10, was approved and published in mid-2024. The measure came into force on July 11, 2024, opening new doors for those who had been excluded from the market by the need to save 10% to 20% of the property value, which banks traditionally do not finance.
Eligibility Criteria
- Age: Between 18 and 35 years old
- Tax residence: Must be a tax resident in Portugal
- First home: The financing is exclusively for the acquisition of the first permanent residence. The applicant cannot own any urban residential property.
- Income: Annual gross income must not exceed €81,199 (8th IRS bracket)
- Debt-to-income ratio: Must not exceed 45-50%
- State guarantee: Must not have previously benefited from the State's personal guarantee under this Decree-Law
- Property value: Cannot exceed €450,000
The Public Guarantee
The public guarantee is the central element that enables 100% financing. It covers up to 15% of the property value, reducing the risk for banks.
If the borrower defaults on payments, the State covers part of the bank's loss. However, the young buyer remains responsible for reimbursing that amount to the State.
Couples
When a property is purchased by a couple, the guarantee may apply partially — only to the share corresponding to the eligible member, similar to how the IMT youth exemption works.
Debt-to-Income Ratio
The debt-to-income ratio represents the percentage of total household income allocated to paying all credit installments (mortgage, car loans, credit cards, etc.).
Ideally, this ratio should not exceed 30%. Under this measure, banks can accept debt-to-income ratios of up to 50%.
Buying Without Savings: A Real Possibility
With this new measure, buying a home without savings has become a tangible reality. Traditionally, Portuguese banks finance up to 80-85% of the property's appraised value. With this measure, banks can now lend 100%, provided the borrower meets the established criteria.
Associated Costs
- IMT: A separate law also provides IMT and Stamp Duty exemption for young buyers on their first home up to €316,772. This exemption came into force on August 1, 2024.
- Other costs: Notary fees, registrations, insurance, Stamp Duty on the mortgage, and possible real estate mediation costs. Credit intermediation services are always free.
Tips for Young Buyers
- Financial planning: Before proceeding with a purchase, carefully calculate all costs involved and ensure your debt-to-income ratio stays within acceptable limits.
- Property selection: Consider not only the price but also the location, condition, and future appreciation potential.
- Interest rates: Three types are available — fixed, mixed, and variable. Compare offers from different banks.
- Knowledge is power: Stay informed about market conditions and bank offers to make the best decision.
Conclusion
Decree-Law 44/2024 represents a significant change in housing access in Portugal. The youth mortgage with 100% financing is a unique opportunity, but one that requires careful planning and a clear understanding of the responsibilities it entails.
