Mathew Wood of Hola Properties – heaquarterd in Lanjarón – explains the benefits of ICO scheme mortgages, backed by the Spanish government…
WITH the real estate market in Spain fast evolving, the return of attractive mortgage conditions is opening new doors — especially for younger buyers, and for sellers who can take advantage of a wider market segment. One of the most impactful changes is ICO scheme backed mortgages, offering up to 100% financing for buyers under 35. That means, in short, that the government acts like a guarantor on the deposit that is otherwise hard for young people to save.
What is this, you might ask?
To explain the situation simply, Spain has introduced a new mortgage scheme that allows eligible buyers to borrow 100% of the purchase price of their first home — with no need for a deposit. The initiative, backed by the Spanish government through the ICO (Instituto de Crédito Oficial), is designed to help young people and families who are struggling to save enough to buy their own property.
Traditionally, Spanish banks only offer mortgages for up to 80% of a property’s value, leaving buyers to find the remaining 20% themselves — frequently tens of thousands of euros that you lose if the sale falls through. Under the new ICO scheme, the government acts as a guarantor for that missing 20%, meaning that banks are now able to lend the full amount of the home’s price.
In theory, you could buy a house without having to put down a deposit. However, buyers must still pay purchase-related costs – such as taxes, notary fees, and legal expenses – which usually amount to around 10% of the property’s value.
Who can apply?
To be eligible, you must:
- Be under 35 or part of a family unit with dependent minors.
- Have legally resided in Spain for at least two years before the application.
- Have a gross annual income not exceeding €37,800 (this limit doubles for joint applicants).
- Not own another home, with certain exceptions (e.g., inherited properties).
- Use the purchased property as your primary residence.
The property must remain as your main home for at least 10 years and cannot be rented out or sold during that time. If the property has a good energy rating (D or better), the guarantee may even cover more than 20%. Remember that, by 2030, houses must meet ratings of D or above.
Which banks offer the scheme?
Several banks are already taking part in the scheme, including Banco Santander, Unicaja, Ibercaja, Evo Banco, and UCI, with others expected to join soon Applications are made directly through participating banks.
The scheme is open until the end of 2025, with a possible extension to 2027, depending on demand.
The ICO scheme is a real boost for first-time buyers
The government hopes that the ICO scheme will make homeownership more achievable for younger generations and families who cannot afford to save large deposits — particularly in areas where house prices are high but wages remain modest.
In total, the scheme aims to help around 50,000 people or families on to the property ladder. However, its implementation has encountered several challenges.
What are the main challenges with the ICO scheme?
Despite the government’s aim to help over 50,000 individuals, the scheme’s rollout has been slower than anticipated. Many banks, including major institutions like Banco Santander and Unicaja, have signed up to offer these mortgages. However, potential applicants report delays and confusion. Some banks are still finalising internal procedures. Is this typical Spanish “red tape”? It can be negotiated.
Anecdotal reports from forums, such as Reddit, indicate that applicants are waiting months without clear guidance from banks. This has led to frustration, especially amongst those eager to buy their new home. It also highlights the need to engage an experienced property professional from the start, rather than trying to do it yourself. This is especially important for newcomers to Spain, maybe here for two years, but with limited Spanish to understand something so detailed and complex.
Mathew Wood says: “We have had no problems at all getting people ICO scheme mortgages and have the right connections with the banks to do so. So if they come to us, we can help them avoid any issues they might otherwise have with forum users or people in the bar who have opinions!”
Concerns over housing prices
Experts warn that the scheme could inadvertently drive up housing prices. This remains to be seen. While the scheme eliminates the need for a deposit, buyers must still cover additional costs, such as taxes and fees, amounting to approximately 10% of the property’s value (as with all property purchases).
A significant barrier is the lack of knowledge amongst potential buyers. Surveys indicate that 60% find the mortgage process “difficult” or “very difficult” to negotiate, with many unaware of the steps involved. This lack of understanding can end in problems or no progress. Again, this totally highlights the need to engage expert help from the start, and not use the “DIY” approach!
It’s good news for sellers and buyers, despite some “red tape”
The Spanish government pledged its €2.5 billion guarantee scheme in 2023, managed by ICO. Agencies such as Hola Properties, which keep up with all developments in the property market, have already processed several successful applications under the ICO scheme, and know the correct sequence of steps to take.
Agencies who constantly follow the market will know what is needed to apply – and whether you are eligible. This can save frustration and wasted time!
General impact on the property market
The introduction of ICO scheme is visibly increasing property transactions. In September 2024, Spain recorded over 61,000 housing transactions – the highest monthly figure since 2007. Additionally, mortgage approvals rose by 11% in January 2025, compared to the previous year, with an average loan amount of €152,233.
This shift is not just good news for buyers — it’s a potential game-changer for sellers in a region where the dream of homeownership can feel sightly out of reach, and young people are stuck living in the parental home!
The Spanish government’s ICO scheme is a beacon of hope for many people in Andalucia, where property prices have been steadily rising, making it increasingly difficult for first-time buyers to enter the market.
So what do we make of it?
While the ICO scheme is commendable, some reports indicate that over a third of applications have been rejected – because of stringent eligibility criteria. Critics argue that the requirements may be too restrictive, potentially excluding many who could benefit from the scheme. On the other hand, people might be applying without understanding the requirements in the first place.
Despite a few barriers, the ICO scheme represents a significant step toward addressing housing accessibility in Spain.
This shift is not just good news for buyers — it’s a potential game-changer for property sellers too.
Thanks to falling interest rates and this government-backed ICO scheme, more people are now eligible to buy homes with no initial deposit. That’s particularly true for first-time buyers. And they’re actively searching for properties. However, not all properties qualify for a mortgage — and that’s where many sellers become confused about what is eligible.
What’s the risk for sellers?
A growing number of rural and village homes — especially older ones — have incomplete paperwork. This might include:
- Undeclared floor space.
- Missing occupancy certificates.
- Buildings (or parts of them) not formally registered.
If your property has any of these issues, it cannot be mortgaged. That means that if a young, motivated buyer falls in love with your house, the bank won’t lend the funds. And the sale will fall through. Is this situation retrievable with forward planning? Probably, yes!
What do we take away from the situation?
Experienced estate agents frequently see (and understand) paperwork and legality problems, especially in rural properties. Owners are frequently unaware that their paperwork is incomplete or outdated. Without knowing that the paperworkhas errors, they are missing out on an entire market segment — especially buyers aged 25–35, who depend on finance.
And the good news? In many cases, the documentation can be corrected before marketing the property – with the correct advice!
Mortgage buyers represent a huge percentage of the real estate market in 2025. ICO scheme mortgages, in particular, are available for a limited time — and this buyer bonanza won’t last forever. A qualifying property could sell faster and have a wider audience if it complies for the ICO scheme. To take advantage, you must ensure that you are prepared and have your paperwork in order. In fact, that advice applies for ANY sale – so don’t leave it to chance and don’t hold off on consulting specialists.
- Read a property report for Granada and Costa Tropical areas.
