Lithuania Proposes New Support for First-Time Homebuyers

Lithuanian parliamentarian Gintarė Skaistė has introduced legislative amendments aimed at assisting individuals under 36 and young families in acquiring their first homes. The proposed measures seek to address the persistent problem of insufficient funds for down payments, a significant hurdle for many aspiring homeowners.

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The state must help people overcome this starting barrier and create the opportunity to build a life in Lithuania earlier, not after a decade of saving.

One key proposal is for the state to provide financial support, potentially covering up to 10% of the property's value. Crucially, the repayment of this support would be deferred. It would only begin once the outstanding mortgage balance drops to 80% of the property's value. This means most beneficiaries could start repaying the state support around five to eight years after securing their home loan, depending on loan terms and repayment schedules.

Additionally, Skaistė proposes a new state guarantee mechanism. This would apply when banks require a larger down payment than stipulated by the Bank of Lithuania's (LB) Responsible Lending Regulations. The state would then guarantee the portion of the down payment that exceeds the standard requirement, reducing the need for young people to accumulate substantial initial savings.

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Currently, the existing state support system is oriented towards a limited portion of society and is often applied to lower-value housing or specific territories, leaving a significant number of young working people, especially in large cities, without real help.

Skaistė argues that the current state support system is too restrictive, often benefiting only a limited segment of the population or smaller-value properties, particularly outside major cities. She emphasizes that her proposed measures are designed to be broader and more flexible, assisting individuals with sufficient income for mortgage payments but lacking the means to quickly save a large down payment. The proposals are intended to align with LB regulations, avoiding additional risks to the financial system. The amendments come as the minimum down payment for first-time homebuyers is set to increase to 10% in August, though banks often require 15-25% or even higher, especially for older properties or custom-built homes.

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I propose broader and more flexible measures that would help people who have sufficient income for a housing loan but lack the ability to quickly accumulate a large down payment.