State runs out of money for backing family mortgages

Due to high demand and lack of funding, the government-backed mortgage program for families with children is running out of money, and the state plans on partially commercializing the initiative, reported Latvian Radio Wednesday. 

Within the program, the state acts as a guarantor for part of the downpayment for a family's first home. The government-guaranteed part is 10 to 20% of the mortgage sum, depending on the number of children in the family. 

The program reduces the time required to save money for the downpayment.

As funds for the program, coming from money for granting residence permits, have dried out, the Economics Ministry proposes asking families pay for the state backing.

Families would have to pay a minimum of 1.7% a year or up to 3.85% a year from the backed sum, based on the size of the family, Dace Vītola, a representative of the Economics Ministry, told Latvian Radio.

In Q4 of 2015 every third mortgage was backed by the state, and every second mortgage in Q1 of 2016.

According to the Economics Ministry, the proposal is still a lot better than any bank offer.

"This is practically the only way the program can be continued and significant state support can be granted to families buying homes [..]," said the ministry.

A total of 2,226 families with 3,251 children have received state backing within the program. The state plans on granting support for 2,000 families this year, 4,500 in 2017 and 6,000 in 2018.

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Economy
Economy