Apply for a mortgage when you are young: Mission Impossible
In Good Finance, mortgage comparator, we have discussed the options that young people have to become independent by buying a house with mortgage financing . I already anticipate that it is becoming increasingly difficult for them to own a property.
The basic business of banking is to capture deposits from savers and channel it to financing (investment and consumption).
Not risky to affirm that young people and banks
Therefore it is not risky to affirm that young people and banks are obliged to understand each other. Another thing is that the relationship is bidirectional or becomes a ” want and not power ” when talking about mortgages for young people.
The economic situation is affecting with special virulence in the group of young people, with unemployment above the average, low wages and precarious contracts. Increased probability of being unemployed, insufficient and unstable income make it difficult for many couples to meet the mortgage concession requirements of financial institutions:
- Work situation of the applicant. Banking requires a broad working life, with few periods of inactivity and with an indefinite contract that is several years old.
- Borrowing capacity : financial institutions that the maximum fee that a client can pay cannot exceed 30 or 40% of the monthly income of the mortgage applicants.
- Savings to contribute to pay expenses and others. There are fewer and fewer mortgages that finance 100%.
- The possibility of providing double guarantees and guarantors . A mortgage with other properties that can be mortgaged and with the guarantee of the family is much more likely to be approved than one in which there are only two mortgaged holders.
- Family stability Young couples who buy are more likely to break up than consolidated couples, with the mortgage payment problems that a separation entails.
Difficulties of young people to access a mortgage
If we specify the general risk criteria of banking for the young group, it is not very difficult to identify the difficulties they have in contracting a mortgage loan:
- Short working life , with difficulties in accessing indefinite jobs and with possible periods of unemployment. The perfect combination to be told no.
- Limited borrowing capacity . Two mileurist holders without savings at best could apply for a mortgage of about 180,000 euros for 40 years (to acquire a home of no more than 160,000 euros).
- The saving capacity of the young Spaniard shines by his absence, in general.
- Traditionally parents guarantee their children so they can apply for a loan. The problem is that there are more and more indebted or unemployed parents. And with this situation they serve little as guarantors.
- Couples are becoming less stable ; and young couples have a high incidence of rupture.
Of all the aforementioned problems, the only one that has a solution, in certain cases, is to provide guarantors, since there are mortgages subsidized by certain Autonomous Communities for the youngest group in which the Administration guarantees a part; The problem is that financial institutions are often not interested in signing these types of mortgage products and do not actively market them, so sometimes you almost have to “force” them to offer them.
Rent should be a reference option
But the Hispanic buying mentality and low rental culture do not favor a competitive and attractive rental market. An interesting option is the rental contract with the option to buy, as it allows us to save while paying a rent, to later exercise the option and request a mortgage with greater chances of success.
Young people are the main victims of the crisis , both at the level of unemployment and access to housing. When financial institutions suffer from lack of liquidity and select their clients much more, those under 30 see their prospects of living in their own homes fade. One of the many problems that our economy causes the least guilty of their current situation.