How to arrange a mortgage for real estate in Finland for foreigners?

The unique real estate market of Finland

Finland represents an interesting segment of real estate, primarily shaped by the needs of local buyers. Foreign investors are quite rare here. An interesting trend has been observed: after the global financial crisis of 2008, which severely impacted the real estate market in the country, housing prices began to steadily rise starting in 2010, especially in the Helsinki area. One of the key reasons for this growth is the positive economic dynamics in the country.

Recovery after a recession

In 2020, Finland overcame the recession caused by the COVID-19 pandemic. According to data from Global Property Guide, from the fourth quarter of 2019 to the third quarter of 2021, housing prices in Helsinki increased by 9.3%, while in other regions of the country, the growth was only 4.2%. However, in remote areas, there is a trend of declining housing prices, which can be attributed to the migration of the population to larger urban agglomerations.

The mortgage lending market

Such significant changes in the Finnish real estate market have been made possible by a substantial increase in lending volumes over the past two decades. As reported by the Bank of Finland, a record number of mortgage loans were issued in 2020. This is due to the fact that low interest rates on mortgage loans, which fell to a historic low of 0.79% in 2021, create attractive conditions for borrowers.

Financial institutions and mortgage products

The Finnish mortgage market features various banks.

• Bank of Finland
• Aktia Savings Bank
• Helsinki OP Bank
• Carnegie Investment Bank
• Nordea
• Danske Bank

Each of these financial institutions offers mortgage services for both local residents and foreign clients; however, the process of obtaining a loan may be more challenging for the latter.

Obtaining a mortgage for foreign citizens

In order for a foreign citizen to obtain a mortgage in Finland, they must have a residence permit or a guarantor who is a citizen of the country. Another important condition is having a stable income from sources in Finland. The maximum term for a mortgage for foreigners usually does not exceed 20 years, and the borrower must contribute their own funds in the amount of50-60%from the cost of the purchased real estate.

Trends in the mortgage lending market

Economist Irina Hyamyalainen from Habita International Estates Ltd emphasizes that in recent years, many financial organizations in Finland have stopped offering loans to foreign clients. This can create difficulties not only in obtaining a mortgage but also in opening a bank account. At the same time, unlike several other European countries, Finnish banks are willing to consider applications from borrowers with a residence permit, even if they are not permanent residents of Finland.

Conditions for obtaining a loan

To apply for a mortgage loan, the client must be of legal age, and the borrower's age at the time of loan repayment completion must not exceed65 years oldEvery creditor is required to conduct a thorough assessment of the client's financial situation, which includes analyzing their income. The borrower must confirm the presence of a stable income in Finland, such as payments from an employment contract or dividends from investment activities.

When it comes to obtaining a mortgage in Finland, it is important to remember that the costs of servicing the loan should not exceed 30% of the borrower's monthly income.

Finnish banks place special importance on having a positive credit history, which needs to be confirmed with various documents. The more the borrower can allocate for the down payment from their own funds, the higher the likelihood of receiving approval from the lending institution. It should also be noted that owning real estate both in Finland and abroad, for example, in Russia, can play a significant role.

Stable source of income

Irina Hyamyalainen, an expert at Habita International Estates Ltd, emphasizes that in order to successfully obtain approval from the bank, it is necessary to demonstrate a stable and long-term source of income in Finland. This can be an employment contract or any other legal source of income. Additionally, proof of the address where the borrower actually resides is required.

Many Finnish financial institutions have special investment groups, and if a client invests between 50,000 and 2,000,000 euros, it significantly increases the chances of successfully obtaining a mortgage.

Requirements of banks for real estate

As for the banks' requirements for real estate, in Finland it is possible to obtain a loan for both the purchase of ready-made housing and for the construction or renovation of a residential property. It is also necessary to have the property's value assessed by a certified expert; otherwise, the chances of getting a loan are significantly reduced.

If the borrower fails to make timely repayment of the loan, the bank has the right to sell the collateral and use the proceeds to settle the debt. It is important to note that the creditor does not have the right to seize the property without a court decision.

Reasons for mortgage loan denial

According to Irina Khmyalyainen, one of the key reasons for a mortgage loan denial is the low liquidity of the property that the borrower intends to purchase. Conducting a thorough inspection of the property's condition and having a report from a certified specialist significantly increases the chances of obtaining the loan.

• Most banks work with a specific list of experts whose reports they accept as valid.
• It is important that such reports not only provide an assessment of the market value of the property but also include information about the condition of the engineering systems.

The cost of property appraisal

As of today, the costs for an official apartment appraisal are around 750 euros, while for a land plot with a house, the appraisal cost is approximately 1300 euros. For a foreign borrower wishing to apply for a mortgage, a package of documents will need to be gathered, including:

• income verification;
• documents for the property being purchased;
• other necessary certificates.

Conclusion

Thus, in order to successfully obtain a mortgage loan in Finland, the borrower needs to prepare thoroughly, gather all the required documents, and take into account the bank's requirements when applying for the loan.

You will need certain documents to successfully complete the transaction for purchasing real estate abroad. First and foremost, you will need a valid passport, as well as a preliminary purchase agreement. Additionally, you will need to provide proof of your income, along with reports for the last two years in the 2-NDFL format. It is very important to confirm your good credit history, as well as to provide documents proving ownership of property, both in your country and in Finland. Don't forget the necessity of an appraisal of the property being purchased, as its results can significantly affect your ability to obtain a loan. Equally important will be the translation of all original documents into Finnish or English, followed by legal certification in accordance with international standards.

Features of mortgage lending in Finland

Mortgage financing for foreign citizens in Finland has its unique features. Standard loans are issued in euros, and the average loan amount is about 50% of the fair market value of the property; however, in some situations, this percentage can reach up to 70%. The borrower's age should not exceed 65 years, and interest rates range from 3.8% to 4%, although some banks may offer rates as high as 6%. The repayment terms for such loans can range from 20 to 25 years, depending on individual conditions.

Early repayment option

Borrowers can also expect the option of early repayment of their debt.

• This is possible without additional penalties if such conditions are specified in the loan agreement.
• It is important to note that the lending conditions may vary depending on which bank you take the loan from.
• When purchasing new buildings, you can expect a maximum loan term ranging from 20 to 25 years, while for secondary housing, the term can be up to 10 years.

Floating rates and their impact

It should be noted that home purchase loans in Finland are most often offered at floating rates. These rates depend on the EURIBOR index, which indicates the price at which banks lend to each other. If this index rises, your monthly payments may increase, which is definitely something to consider when planning your financial budget.

Processing time for the application

By the way, the processing time for a loan application is approximately two weeks. This should be included in your timeline when planning to purchase real estate. Nowadays, there are many options for apartments in Finland. For example, in the popular city of Imatra, you can buy a cozy two-room apartment for just €35,000. The living area is 49 m². The apartment is located in the city center and can be arranged remotely through a power of attorney, which eliminates the need for the buyer's personal presence. A significant advantage is the direct sale from the owner without additional commissions for the buyer, making this offer particularly attractive. The exclusive rights to sell this property belong to our company.

Attractive offers

There is also an opportunity to purchase a three-room apartment in Varkaus for €16,700. The area of this apartment is 77 m², and it is located on the third floor in one of the most sought-after residential areas of the city. All social infrastructure and necessary services are within walking distance, and this area has many places for relaxation and active leisure: parks, beaches, and other sports facilities.

Pay attention to these wonderful offers when choosing real estate in Finland, and you will be able to make a profitable investment in your new life.

Real estate in Finland

In the center of Finland, in the picturesque area of Nilsiä, a townhouse with an area of 34 square meters is for sale for 19,500 euros. This house, built in 1976, is in excellent condition and is heated by electric appliances. The monthly utility fees are 85 euros, and the owner pays for water based on actual consumption. The transaction for this property can be completed remotely, allowing buyers to make the purchase without the need for personal presence through a power of attorney.

A house in Perho

Another interesting offer on the market is a house in Perho, available for 16,000 euros. The area of this property is 124 square meters, and it was built in 1953. The house was renovated in 2007, which includes a new metal roof and cozy wood heating. There is a wood stove in the kitchen, and a fireplace is installed in the living areas, making this home particularly appealing to those who value comfort.

Townhouse in Kokkola

Don't overlook the townhouse in Kokkola, which is offered at a price of 19,500 euros. This functional residential property, covering 32 square meters, was built in 1977 and is located in the center of Nivala. It's worth noting the presence of central heating and modernized plumbing, which was updated in 2007. The area where the house is situated has a calm atmosphere and is close to all essential infrastructure facilities.

Apartment in Yamsa

Our review also mentions an apartment in Yamsa, which is priced at 15,000 euros. It is located on the second floor of a multi-apartment building built in 1976 and has an area of 76 square meters. The glazed balcony offers a picturesque view of the courtyard, and the cozy atmosphere of the neighborhood, situated at the end of a quiet street, is complemented by a barbecue gazebo, creating a sense of tranquility and homely comfort.

Apartment in Nurmes

Those who need more spacious housing may want to consider an apartment in Nurmes. The area of this property is 76 square meters, and the price is 23,000 euros. The apartment is located on the first floor and offers a reasonable layout. A glazed balcony and a district heating system make this offer an attractive and comfortable solution. The utility costs here also depend on consumption.

Townhouse in Keppel

It is also worth highlighting a townhouse in Kepple, which can be purchased for 19,500 euros.

A variety of real estate from Habita International Estates Ltd

Habita International Estates Ltd offers a wide range of real estate in Finland. For example, in Helsinki, you can purchase an apartment with an area of 41 m² for €279,000. If you are interested in details about this property, we recommend contacting a representative from Habita, who can provide all the necessary information.

A wide selection of apartments and houses

There is also an interesting offer in Espoo — an apartment priced at €399,000, with an area of 126 m². This property includes 6 rooms, comprising 3 bedrooms and 2 bathrooms. For more detailed information about this property, we recommend contacting the representatives of Habita for a deeper discussion of its features.

Commercial real estate in Pieksämäki

In addition, a catering establishment — a café or restaurant with an area of 167 m² — is for sale in Pieksämäki for €390,000. This property is suitable for obtaining a residence permit upon purchase. An online viewing and remote purchase are also possible, with payment available in both rubles and cryptocurrency.

The establishment is located in the city center, features large display windows, and is in excellent condition after renovations. For 2024, there is already a permit for 100 seating places, of which 76 are indoors and 24 are on the summer outdoor terrace.

Real estate in Pori

World Haus Finland offers a house in Pori with an area of 55 m² for €20,000. This house was built in 1963 and has not been used for the last five years, which has affected its condition, especially regarding heating. The property has its own well, although there is no information about the water quality.

There are also three septic tanks for wastewater available, which potential owners should take into account.

Apartment in Jaanekoski

A 67 m² apartment is available for sale in Jaanekoski for €19,000. This bright residence is located on the second floor of an apartment building with an elevator and overlooks an accessible area. The kitchen in the apartment has been previously renovated.

In addition, it comes with a glazed balcony that offers a beautiful view of the sports facilities.

Townhouses in Finland

In Finland, it is also possible to purchase townhouses. One of them is located in Kauhava, with an area of 60 m² and a price of €16,000. This two-room residence is offered with the option of a remote transaction, allowing the purchase to be completed without being physically present on-site.

• A lot of storage space.
• Functional and comfortable living conditions.

A townhouse with an area of 48 m² is listed in Lukhanka for €19,000. This offer also implies comfortable living conditions, and the transfer of ownership can be done remotely. This property has its own garden area, which can be accessed from the living room, which is important for future residents.

The set includes:

• Garden furniture and equipment.
• A bicycle that adds extra value to this property.

Investment opportunities

Among the listings provided by Habita and other agencies, there are both apartments and houses that can be a good investment for those looking for real estate in Finland. Each of the available options deserves careful consideration to meet the diverse wishes and needs of potential buyers.

In Finland, you can find attractive residential real estate options offered by the agency vipcon lkv. For example, in Kouvola, a one-bedroom apartment with a total area of 32 square meters is for sale, located on the second floor of a residential building built in 1972. The property is equipped with a gas heating system, and the apartment has already undergone plumbing replacement and the installation of new windows.

The cost of this offer is21,837 eurosMoreover, the management company offers the option of installment payments for repairs.

Offers in other cities

In Riihimäki, there is also a similar option - a one-room apartment with an area of33 square meterslocated on the third floor of a building with an elevator. The asking price for this property is —25,000 eurosThe interior space of the apartment is well-organized, and the kitchen can be equipped with a compact dining table. All surfaces in the apartment are in excellent condition, making it very appealing to buyers.

In Savonranta, you can also find a great offer — a house listed for sale for9,500 eurosThis property has a total area of130 square metersIt was built in 1960 and underwent renovations in the 1990s. The property includes an outbuilding that features a bathhouse equipped with a wood-burning stove. The surrounding area is known for its fishing lakes and places to gather mushrooms and berries, which attracts those who enjoy spending time in nature.

Other real estate options

Another interesting option is a house in Virrat, which costs25,000 eurosThis building has an area of75 square metersIt was built in 1930. There is wood heating provided here. The kitchen is equipped with a refrigerator, electric stove, and wood-burning stove, ensuring comfortable living conditions. This house also includes a sauna located in a separate room. The annual tax on this property is85 euros.

Additional expenses and mortgage

It is important to pay attention to the additional costs associated with purchasing real estate in Finland. The appraisal of the financed property can cost from300 to 1500 eurosDepending on its characteristics. It is also important to consider that the bank charges a fee for providing the loan in the amount of0.4%From the amount. The services of mortgage brokers are usually offered without additional costs from real estate agencies.

Insurance for the collateral is definitely required, although the amount will depend on the specific insurance company. However, types of insurance such as the borrower's life insurance are not mandatory.

Alternative financing options

It is also worth considering the possibility of alternative mortgage financing, particularly the use of loans from housing cooperatives. In many apartment buildings in Finland, the owners are housing cooperatives that own the land under the buildings or lease it from private owners.

• Each apartment corresponds to a certain number of shares, which are related to its market value.
• By purchasing such real estate, the buyer becomes a shareholder.
• This allows for managing the apartment, effectively holding rights comparable to ownership.

Real estate financing in Finland

In Finland, there is an interesting opportunity to purchase housing through housing cooperatives, which provide loans for those looking to buy property. Unlike traditional banks, these organizations offer more flexible terms for foreign citizens who do not have a residence permit.

Advantages of housing cooperatives

Irina Khmyalyainen from Habita International Estates Ltd notes that this method of financing attracts both Russian citizens and buyers from other countries. The possibility of obtaining a loan applies to both properties that are under construction and ready apartments on the secondary market. The terms offered by housing cooperatives are generally more favorable compared to traditional bank loans.

Investments at the initial stage of construction

Purchasing real estate properties at the initial stage of their construction is an especially attractive option for investors.

• At first, the borrower pays only the interest.
• The principal amount of the debt starts to be repaid only three years after the completion of construction.

Lending and its features

Alina Dashevskaya from Knight Frank in St. Petersburg emphasizes that the lending procedure in Finland is similar to mortgage lending but has some specific features of its own. A loan for purchasing an apartment in a new building is issued through a housing joint-stock company, which receives a loan from the bank in advance to implement the construction project. This is the scheme that allows the buyer to proceed without the bank's involvement in the transaction process.

Conditions for obtaining a loan

One of the key conditions for obtaining a loan is the requirement to make a down payment. This payment can be divided into several parts if the purchase of the apartment occurs in the first year of the project's implementation. This flexible financing is available for foreign buyers and is one of the attractive aspects of the Finnish real estate market.

As for the conditions for obtaining a loan, the average margin interest rate is about1.1%per year, and the minimum down payment must be at least40%from the total cost of the apartment. Payment for the purchase goes through special accounts, similar to escrow accounts, which offer protection of funds in case of potential construction issues.

Issues with the loan

If there is a debt on the loan, the construction company may send several notifications to the co-investor. If the problem is not resolved, there is a possibility that the residential property will be seized in favor of the housing joint-stock company, which has the right to rent it out with the aim of recovering the debt. The apartment can be returned to the original owner after three years; however, if the situation does not normalize, legal proceedings may arise, resulting in the property being confiscated.

Sale of an apartment and obligations under the loan

When one of the owners decides to sell their apartment, all financial obligations related to repaying the loan transfer to the new owner. This obligation means that it is important to consider the financial nuances in the process of purchasing real estate in Finland, as they can significantly impact the buyer's future obligations.

Conclusion

In conclusion, I would like to emphasize that the Finnish real estate market is an interesting subject for study, especially for foreign buyers, despite some limitations. Over the past few years, we have observed a steady increase in housing prices, and it seems that this trend will continue due to the country's strong economy and reliable mortgage lending system.

The attractiveness of the Finnish market lies in the fact that it is largely oriented towards domestic buyers, while also providing opportunities for foreigners to participate in this process. By being aware of the requirements, such as the need for a residence permit, proof of stable income, and a high down payment, potential buyers can approach the mortgage application process more purposefully.

Despite the challenging conditions, Finnish banks are willing to consider applications from individuals with temporary residence permits. This opens doors for many who wish to become property owners in this beautiful country. However, it is important to remember that each situation is unique, and it is crucial to carefully approach the choice of bank and documentation.

Key aspects of mortgage lending in Finland:

• Maintaining sustainable growth in real estate prices.
• The flexibility of banks regarding applications from foreigners with temporary residence permits.
• The necessity of having a stable income and a high initial down payment.
• A detailed inspection of the property's condition before obtaining a loan.

Interestingly, despite all this, the mortgage lending sector in Finland demonstrates flexibility, allowing individuals to obtain the necessary funds for purchasing housing while meeting all conditions. Thus, for those considering investing in Finnish real estate, a smart approach to financing can be the key to success.

I hope this article has been helpful and will assist readers in better understanding the nuances of obtaining a mortgage in Finland and the prospects in this market. It is important to remember that despite all the potential challenges, opportunities do exist, and with the right knowledge and approach, they can be confidently utilized.