Proceeding from our previous article on “What should I know if I want to move to Finland?” we will now explain some of the requirements for getting a home loan in Finland, either upon entering the country or after living here for some time. This includes how much equity and income you need, alternative ways to be granted a loan, and more.
General guidelines and regulations for mortgage loans
Before you apply for a home loan in Finland, it helps to know about the rules and regulations that apply. Your go-to place for finding the correct information is The Finnish Financial Supervisory Authority (FSA), which outlines the requirements for getting a home loan in Finland.
The guidelines and regulations for mortgage loans can be divided into three sections: General provisions, Mortgage loans, and Creditworthiness criteria:
- The general provisions section provides information on the purpose of the guidelines and regulations, who they apply to, what they apply to, and how they should be read.
- The mortgage loans section is divided into two subsections: One subsection pertains to mortgage loans granted by banks while the other subsection pertains to credit unions.
- The creditworthiness criteria section provides information on eligibility requirements for getting a loan as well as what happens if you cannot meet the requirements.
We now proceed to answer some of the most common questions regarding home loans in Finland.
How big is the down payment?
The down payment in Finland is usually quite low for first-time home buyers and can be expected to be around 3-5% of the purchase price. If you take out an ASP loan, it goes up to 10%, and if you have already owned a home before, this normally goes up to 15%, which means that you need 3-5 times as much in savings to be able to get the loan.
In one of Finland’s neighboring countries, Norway, a down payment of 15% is actually expected by first-time home buyers as well, raising the requirements for securing a loan. Asking family members for help to cover the down payment has therefore become more and more normal – a process that goes by the name “Realkausjon.” We will describe this in more detail in its Finnish and English forms below.
How much collateral is needed for a home loan?
In most cases, you need collateral equal to 70% of the home’s market value. If the home loan exceeds 70% of the value, you will need to provide some other form of collateral. An alternative is to ask a family member to provide the collateral you need through their property – this is called “Omaisuuden Turvallisuus” in Finnish, and “Security Property” in English. The person providing the security property is the one who will be at risk if the borrower is unable to pay down the loan.
What are the best banks?
There are many banks that offer home loans in Finland and they have different features. For example, some banks are only available for Finnish citizens while others are open to all EU citizens. If you are a foreigner looking for a bank that offers home loans, you can consider well-known ones like Nordea, Danske Bank, Aktia, or smaller local banks, depending on what area you live in.