Public guarantee for 100% of credit compromises the debt-to-income ratio criterion.

New measure of public guarantee in mortgage credit may compromise debt-to-income ratio.

The new public guarantee for mortgage credit, which allows financing 100% of the home value, aims to support those who do not have savings for the down payment.  

However, the measure could result in higher installments and challenge the debt-to-income ratio criteria, according to experts in the sector and Deco, cited in the Notícias ao Minuto.

This initiative benefits young people without savings, eliminating the need for initial capital, but increases the value of installments. "The measure will help young people without savings, but requires greater debt capacity", highlighted Paulo Caiado, president of APEMIP.

The measure will be operational until the end of the year, taking effect in the last days of December, as stated by Joaquim Miranda Sarmento, Minister of Finance.

It is aimed at young people between 18 and 35 years old, with incomes up to the 8th IRS bracket (81,199 euros annually), and applies to properties valued up to 450,000 euros. The State guarantee covers up to 15% of the value, allowing banks to finance the entire property.

This support removes an important barrier: the lack of savings for the down payment, usually required when banks finance up to 85% or 90% of the appraisal value.

However, other limitations remain, such as the effort rate. Banks, following recommendations from the Bank of Portugal (BdP), require that the sum of the monthly installments of all customer loans does not exceed 50% of the net monthly income.

Nuno Rico, an economist at Deco, predicts a limited impact of the public guarantee, due to the macroprudential rules of the BdP. The criterion of 50% of the effort rate may restrict the practical application of the measure, especially because total property financing implies higher installments.

"Moving from 85% or 90% to 100% of the property value increases the installments, requiring higher incomes to meet the debt criteria," he explained.

Although public guarantee represents a positive step to facilitate access to housing, especially for young people, the increase in installments and debt-to-income limits present challenges to its practical implementation.

That's why for the entire home loan application process, it is essential to have support on your side. Whether you resort to it or not, the credit intermediaries at Poupança no Minuto offer a free service that accompanies you from start to finish, finding the best market proposal with the most advantageous conditions for you. We always play in your favor! Simulate your credit here: https://www.poupancanominuto.com/simuladores