Buying a first home is an important goal for many young people, but the initial down payment can be a significant obstacle. To make this process easier, the State has created a public guarantee program, which may allow financing of up to 100% of the property value while also providing relevant tax benefits.
What is the Support for Young Homebuyers
This program consists of a State guarantee that covers the portion of the property value not financed by the bank, up to a limit of 15%. In practice, this means that if the bank grants 85 to 90% financing, the State can guarantee the remaining amount, eliminating the need for an initial down payment.
Main Benefits
- Financing up to 100% (bank + State guarantee)
- Exemption from certain taxes:
- IMT (Property Transfer Tax)
- Stamp Duty
- Registration fees
Conditions
- Be between 18 and 35 years old
- Have tax residence in Portugal
- Income up to the 8th IRS bracket
- Purchase the first permanent home
- Acquisition value up to €450,000
- Own no other residential property
- Have no debts to the Tax Authority or Social Security
- Have never used this support before
How 100% Financing Works
- The bank finances up to 90% of the property value (or less)
- The State guarantees up to an additional 15%
- The State does not provide money directly; it acts as a guarantor in case of default
The guarantee is valid for 10 years. In the event of default, the State pays the bank, but the beneficiary still owes the debt to the State.
Key Aspects to Consider
- The guarantee does not ensure loan approval; it depends on the client’s risk assessment and affordability ratio
- Not all banks participate in the program; prior confirmation is required
- If the property is sold or rented, the beneficiary loses the right to the guarantee
- In case of loan transfer, the guarantee remains valid only for the remaining period of the original term
Tax Exemptions
- Full exemption: properties up to approx. €316,000
- Partial exemption: properties up to €450,000
Example: acquisition of a property worth €320,000
- Without support: €14,969.86 in taxes
- With partial exemption: €284.06
Buying as a Couple
When only one buyer is eligible, taxes are calculated proportionally. For example, for a €200,000 purchase, the eligible buyer may receive full exemption, while the other will pay half of the applicable tax.
Costs That Still Apply
Even with tax exemptions, there are costs that remain the buyer’s responsibility:
- Stamp Duty on the loan (0.6% for terms over 5 years)
- Bank fees (application, valuation, processing)
- Mandatory insurance:
- Life insurance (death/disability)
- Multi-risk insurance (fire, floods, etc.)
Documents Usually Required by the Bank
- Identification document
- IRS tax return and settlement note
- Payslips or self-employed invoices
- Proof of employment contract
- Bank statements
- Credit liabilities record from Banco de Portugal
- Proof of IBAN and address
- Latest credit card statement
If you are between 18 and 35 years old, this is undoubtedly an investment opportunity that can bring great benefits. At JC, we are here to assist you at every step of the process and clarify any questions, making the experience as simple and efficient as possible.