Social-interest housing subsidy

It is the programme that makes the difference between qualifying and not qualifying for a mortgage on a low or moderate income: the Government subsidises part of the down payment and part of the monthly instalment. What almost nobody reads carefully — and what this guide puts up front — are the conditions tied to it. They are not advice: they are recorded in the deed and constitute a real lien on your house. You cannot rent it, you cannot mortgage it without the Authority’s written permission, and if you sell or transfer within six years you must return the subsidy under a table that starts at one hundred per cent.

The Act does not itself set the income limit: Article 2(a) defines a “low- or moderate-income family or person” as one “whose income is within the limits established by the Secretary of Housing by regulation to participate in the Programme.” What the Act does set is how the income you are measured by is computed. Article 6: adjusted monthly income is one twelfth of the family’s total annual income after subtracting two credits — ten per cent of annual gross income as a fixed deduction, and five hundred dollars for each dependant under twenty-one not working, over sixty-five, or a person incapacitated as certified by a physician authorised to practise medicine in Puerto Rico. On the housing side, Article 4 requires the project or unit to have been built within the parameters the Department establishes and the sale price not to exceed the limit the Secretary sets from time to time.

• Be a low- or moderate-income person or family under the limits the Secretary of Housing establishes by regulation.Verified against the official source
• That the dwelling, newly built or existing, be located in a project approved by the Housing Department or its attached bodies, or jointly with a municipality.Verified against the official source
• That the sale price not exceed the limit the Secretary of Housing sets from time to time.Verified against the official source
• Use the property as your habitual and permanent residence, without renting it or devoting it to another use.Verified against the official source
• Keep your share of the monthly payments current to continue benefiting from the subsidy.Verified against the official source

• Evidence of the applicant’s income and family composition, obtained by the Housing Finance Authority or the participating mortgage creditor to determine the interest rate.

1. 1

   Step 1: What exactly it subsidises

   Two things, and they should not be confused with a gift off the price. Article 3 authorises the Secretary “to create a programme to subsidise the monthly mortgage payment and part of the down payment for low- or moderate-income persons or families through the Puerto Rico Housing Finance Authority.” And Article 5 repeats it in terms of effect: “The subsidy shall consist of reducing the monthly payment and the down payment falling to the low- or moderate-income person or family.” How much you get is not in the Act: “By regulation the Secretary of Housing shall determine the subsidy the beneficiary receives depending on the person’s or family’s income and family composition.”

2. 2

   Step 2: How the income they measure you by is computed

   Worth doing the sum before ruling yourself out. Article 6: “Adjusted monthly income shall be computed when determining the interest rate corresponding to the person or family and shall equal one twelfth (1/12) of the family’s total annual income after subtracting from it the following credits: 1. 10% of annual gross income as a fixed deduction. 2. Five hundred (500) dollars for each dependant under 21 not working, over 65, or a person incapacitated as certified by a physician authorised to practise medicine in Puerto Rico.” And Article 7 says who checks: the Housing Finance Authority or a mortgage creditor participating in the Programme obtains evidence of the applicant’s income and family composition.

3. 3

   Step 3: Two rules that surprise people later

   The first is short and final. Article 8: “Once the corresponding subsidy is granted, it shall not be readjusted.” If your income drops later, the Act does not contemplate the subsidy rising. The second is what keeps the benefit alive. Article 9: “The beneficiary must keep current their share of the monthly payments in order to continue benefiting from the subsidy granted under this Act.” And it carries a way back that is worth knowing if you fall behind: “If the loan is in arrears and the beneficiary decides to bring it current, the subsidy for the months in arrears shall be contributed.”

4. 4

   Step 4: The conditions recorded in your deed

   This is the part to read before signing, not after. Article 11 opens: “There shall be recorded in the public deed as restrictive conditions, and shall constitute a real lien on the property, the following conditions.” A real lien, not a promise. There are three. (b): “The beneficiary may not rent the property nor devote it to any use other than their habitual and permanent residence.” (c): “The property may not be mortgaged without the prior written authorisation of the Puerto Rico Housing Finance Authority and restricted to those financial institutions or lenders recognised by the Bank.” And (a), the reimbursement, which is the next step. The Act closes: “The restrictive conditions recorded here shall subsist while the mortgage is in force.”

5. 5

   Step 5: If you sell within six years

   Article 11(a) requires reimbursing the Authority “all or part of the subsidy received … should they decide to sell, exchange, donate or otherwise transfer the property within a period of six (6) years counted from the date the subsidy was awarded,” with this table: first and second year, 100%; third year, 80%; fourth year, 60%; fifth year, 40%; sixth year, 20%. Note two details. One: the first two years are at one hundred per cent, there is no seniority discount yet. Two: the reimbursement “must be made before or simultaneously with the legal transaction giving rise to the transfer of title,” and the Authority’s appearance in the documents is “essential and indispensable” to consent and release the lien.

6. 6

   Step 6: Heirs, co-owners and divorce

   Article 11(a) resolves the three cases separately. Heirs: “If the Programme beneficiary dies, their legitimate heirs shall not be obliged to make the reimbursement provided if the property was legitimately transferred to them by testate or intestate succession.” But it adds the limit: if they became owners within the six-year period and within it decide to sell, exchange, donate or transfer, they are obliged to reimburse under the table. Co-owners: whoever transfers their share to another co-owner “shall be obliged to reimburse that part of the subsidy attributable to their share, applying the percentages indicated.” Divorce: “the Secretary of Housing shall provide by regulation the criteria to be used to determine whether reimbursement applies against the spouse leaving the home.” We did not read that regulation.

7. 7

   Step 7: What happens if you breach a condition

   Here the penalty is harsher than for selling, and it is worth knowing. Article 12: “Breach of the restrictive conditions recorded in Article 11 shall entail suspension of the subsidy contributions and the beneficiary must reimburse the Puerto Rico Housing Finance Authority the entirety of the subsidy received,” except as provided for divorce cases and for transfer within the six years, where the percentages apply. That is: selling in the fifth year returns 40%; renting the house without permission, by contrast, triggers a hundred per cent return and cuts off the subsidy.

8. 8

   Step 8: If you want to sell: the mortgage may be assumable

   Article 13 opens a route and caps it: “The Puerto Rico Housing Finance Authority or the mortgage creditor participating in the Programme shall evaluate subsequent buyers in order to determine whether they qualify to receive the benefits provided in this Act and in the regulation adopted for its implementation. The mortgage shall be assumable only where the subsequent buyer is eligible for a subsidy equal to or less than the original beneficiary’s.” The final phrase decides it: equal or less, never greater. And at the other end of the process, Article 14 eases the first purchase: the deeds of transfer and of mortgage arising from the first sale of dwellings built under this Act are recordable in the Property Registry free of the fees of the Notarial Act and of the Registry tariff.

The programme is created by the Secretary of Housing and administered through the Puerto Rico Housing Finance Authority; the income and family-composition evaluation is done by that Authority or by the mortgage creditor participating in the Programme. Projects must be approved by the Housing Department or its attached bodies, and for projects jointly with municipalities, also by the mayor and the municipal legislature. The Act publishes no form, office, address or telephone, and we do not invent them.

• Renting out the house: Article 11(b) forbids it and Article 12 makes the breach return the entire subsidy.
• Mortgaging the property without the Housing Finance Authority’s prior written authorisation.
• Believing the clawback drops from year one: the first and second years are at one hundred per cent.
• Thinking donating or exchanging does not count: the Act names selling, exchanging, donating “or otherwise transferring.”
• Expecting the subsidy to rise if your income falls: Article 8 says once granted it shall not be readjusted.
• Leaving the loan in arrears without bringing it current: the subsidy is conditioned on keeping your share of payments current.
• Assuming any buyer can take over the mortgage: it is assumable only if the subsequent buyer qualifies for an equal or lesser subsidy.
• Assuming heirs are always free: they do not reimburse if they receive by succession, but they do if they transfer within the six years.

These are the government pages this guide is based on.

• Departamento de la Vivienda

  Vivienda

  bvirtualogp.pr.gov