Repsol YPF

Home saving accounts

They are a savings method with significant tax benefits which may only be used once in a lifetime to buy your primary residence.

 
In order to be able to decide to buy a property, especially given todays prices for this basic good, it is necessary to have at least a small amount of capital to give as a deposit, down payment or make up a percentage of the mortgage. Obviously, in order to have this money you need to have previously saved several thousands of euros.
 
For the majority of future home owners there is no other option but to wait for a few years until they have the required amount. A home savings account is the most appropriate way of saving this capital as it offers better interest and excellent tax benefits.
 
You can only open a home savings account for the purchase of your first home, as such people who already have one do not have this option. In order to prevent people opening more than one such account, regulations state that only one valid account may be maintained for tax deduction purposes. 
 
As such, all taxpayers may only have a single home savings account, which must be separately identified on your income tax return, stating the bank where the account is held, the branch and sort code.
 
Tax relief
Home savings accounts benefit from 15% income tax relief as well as good interest. For both of these reasons, they have become an interesting financial product when buying or renovating a house.
The money deposited can only be put towards the purchase or renovation of what will be your first primary residence. It is a good way of saving with a special feature which means that the deduction is made before you buy it.
 
As with a current account, amounts are paid in as you see fit. The account holder can deduct 15% of the total amount deposited during the year, with a maximum of 9,015.18 euros, from their income tax return. The maximum tax relief which may be obtained in this area is 1352.28 euros.
 
The deductions must be calculated based on the amount in the account on 31 December, and no other day of the tax year. In view of this detail, it is possible to use other more profitable investments for the remainder of the year without losing out on these tax benefits: it is possible to invest the money in deposits or in any other way throughout the entire year and pay it in to the home savings account on the stipulated day.
 
Another advantage of this product is that you can redeem the capital whenever you wish without incurring any kind of penalty, so long as it is going to be used to buy or renovate a property. If it is used for another purpose, the account holder will have to return all the money on which tax relief has been granted up until that date, plus interest, to the tax office.
 
You will also need to make the necessary calculations with the Tax Office if four years after opening the home savings account you have not bought or renovated a house.
 
The purchased or renovated property must be lived in on a permanent basis within 12 months of buying or taking possession of the house if it was being built or renovated. If for reasons beyond the taxpayers control, building work stops and is not finished before the aforementioned four-year period passes, you can request an extension from the tax office. Once the property is occupied, the purchaser must live in it for a continuous period of at least three years.
 
How to choose
Banks and savings banks use home savings accounts to attract customers. They know that it is highly probable that people who go for this type of product will subsequently end up applying for their mortgage there so as to be able to finance the property purchase.
 
In order to obtain the most interest possible from a deposit or home savings account during this maximum four-year period the best advice is to compare different products. The following must be considered:
 
- The type of interest. It is preferable to choose the bank which offers the best interest from the first euro, that is, that the type of interest does not depend on the amount deposited.
- The frequency with which interest is paid (monthly, quarterly, half-yearly or annually). The shorter the period, the more profitable the remuneration will be, as the monthly payment of interest will in turn gradually increase the overall balance.
- Commission. The majority of banks do not charge commission for home saving accounts, as they barely generate any transactions.
- Whether there is a minimum amount for the initial deposit.