Property listings are full of terms that may not be very easy to understand for someone looking to buy their first home. They talk about debt-free sales prices, leased lots, housing company loan payments and long-term plans. What do they actually mean? Buyers are often looking for homes that are affordable and effortless to live in.

We asked for help from a specialist to figure out the actual housing costs for properties for sale. If the sales price is low, is the home also affordable to live in?

First, find out the debt-free price and ownership status of the lot

Last year, OP Koti was the largest real estate agent in Finland when compared by home sale volumes. Lasse Palovaara, Head of OP Koti, advises buyers to first find out the debt-free sales price.

"If the apartment is part of a housing company, the shareholder may be liable to pay for a portion of the housing company's loans. This portion should be calculated as part of the acquisition costs, the 'debt-free sales price'," says Palovaara.

For example, if the housing company has recently renovated its pipelines, the apartment-specific share of housing company loans may be tens of thousands of euros. Often, you can partly or fully repay your share of the housing company loan when buying the property, or you can repay the loan through a monthly housing company loan payment paid to the housing company.

To understand the housing costs, it is also important to know whether the property is on an owned or leased lot.

"If the apartment is on a leased lot, you should find out how long the validity of the lot's lease agreement is, and what the terms are for the lot's owner raising the lease payments. Changes to lease payments can sometimes have a significant impact on housing costs," says Palovaara.

Housing costs are more than just the loan

Usually, people buy their first home with a home loan. The home loan is repaid in monthly instalments, and there are also other costs related to housing. For apartment blocks and terraced houses, these costs are paid as monthly charges to the housing company.

"Maintenance charges allow the housing company to take care of ongoing costs related to housing, such as heating, the electricity use of common spaces, the maintenance of outdoor areas and waste management. Housing company loan payments allow the housing company to manage the loans it has taken out for purposes such as renovation projects," says Palovaara.

Water and electricity use, insurance and internet connection costs are usually paid by the resident.

The owner of a detached house pays housing-related costs directly to the companies whose services they buy.

"Typical ongoing costs for a detached house include electricity, water, insurance, property tax, waste management and the internet connection. The owners also pay for all repair and renovation work themselves, either from their savings or with a home improvement loan from the bank.

In recent years, costs related to matters such as the price of electricity have varied greatly, and this may not decrease in the future," says Palovaara.

"In the big picture, the development of housing costs follows the general inflation rate, but in the future, matters such as the price of electricity may undergo significant changes that may at times be difficult to predict."

Right now, the housing market is seeing lower sales volumes than normal. That means it is possible to thoroughly consider buying a home. You should not be afraid of housing costs, as long as you do not stretch your finances too thinly.

"The most important thing is to assess your financial outlook with the bank and get an idea of how big a home loan you want or can take out. You should ensure that the loan costs won't become too big a burden in the future. It's worthwhile to discuss home loans with the bank and find out what kinds of loans are available, and what the loan term, repayment method, interest rate and possible interest rate protections will be."

Sales prices for homes are based on multiple factors, and the prices are negotiable

Sales prices for homes are affected by multiple factors, which can make price comparisons difficult for someone looking to buy their first home. Homes of similar sizes being sold in the same area can be sold for very different prices. So what affects the sales price of a home?

"The age and condition of the building and apartment, location, building technology, equipment level, materials used in the interior decoration, floor plan, number of floors, size of any yard area included, placement of neighbouring buildings – all these things affect the price," says Palovaara and continues:

"A key factor is the financial situation of the housing company and the amount of monthly charges paid by the shareholder to the housing company. Every home is unique, and the home with the cheapest sales price is not always the most affordable for the buyer when looking at all the costs.

Home prices have fallen in Finland, and buyers can at least try to negotiate a better price. What is a good way to haggle over home prices?

"You should form your own opinion of what the right price would be for the home in the current market conditions. This helps provide clear and comprehensive reasons for your opinion so that the seller can easily consider if they can compromise on their requested price," says Palovaara.

Look at the renovation needs for the coming years

When you see the home for the first time, you will probably pay most attention to the interior decoration. Often, the most financially significant things are related to the structures, meaning you probably will not even see them at a home viewing. As a home gets older, it becomes necessary to plan repairs and renovations for it.

"There are no homes that never need to be repaired, but the technical solutions and materials used in construction can affect how significant the repair needs are," says Palovaara.

If you are buying a building to serve as your home, it is a good idea to request the assistance of a specialist to assess the renovation needs. On the other hand, if you are buying an apartment in a housing company, their renovation needs are outlined in a long-term plan.

"Third-party condition assessments and long-term plans for renovations are very important documents when assessing a potential purchase," says Palovaara.

Housing companies often charge housing company loan payments to collect funds for renovations. Housing companies’ monthly charges are one part of monthly housing costs, but saving on housing company charges is not necessarily a good thing. Low housing company charges may also indicate that the housing company has neglected repair needs and accumulated a backlog of necessary repairs.

"The bigger the repair backlog, the more likely it is that the housing company will face significant renovations in the future that can't be postponed and must be carried out immediately to keep the building in usable condition. A large repair backlog is a factor that lowers the value of a home," says Palovaara.

Responsible housing companies carry out their renovations on time and ensure the backlog does not become too big.

"It's important for a buyer to understand a housing company's general situation, loans and any housing company loan payments they cause to the shareholders. These monthly charges should be considered in relation to the condition of the housing company and its apartments, what kinds of renovations have already been carried out, and what may needed in future."

Energy efficiency cuts costs

Especially for buildings, energy costs constitute the majority of monthly housing costs. As such, it is important to check how energy efficient the building is, and how the energy it needs is produced.

"A building is energy efficient if proper investments have been made in the thermal insulation of its walls, roof, foundation slab and windows, and the building is equipped with a geothermal system, for example. Buildings of all ages can be energy efficient, and you can improve the energy efficiency of a building by carrying out renovations yourself. Your own living and consumer habits also have an impact on the energy consumption of your house or apartment," says Palovaara.

In other words, if you are looking to buy your first home and want to make a good deal, there are a lot of things to consider. Palovaara wants to highlight long-term decision making as his most important piece of advice.

"If you intend to own your apartment or holiday home for ten years, for example, are there repairs or renovations that need to be carried out in that period, and what will they cost? How is the home's value expected to develop during that period? And on the other hand, if something unexpected and surprising happens in your life, and you need to start selling the home in the near future, how much can you sell it for, and how quickly can it be sold?"

Checklist for concluding a home purchase:

  • Find out the apartment or building's debt-free sales price and the ownership status of the lot
  • Calculate the actual monthly costs of the home, including the home loan repayment, monthly housing company charges and other expenses (electricity, water, internet, insurance).
  • Look at the renovation needs for the coming years and their costs