Who can get home loans? OP Financial Group commissioned a survey from Taloustutkimus as an online panel. About 2,600 people in Finland responded to the survey. About 570 of them said they had postponed buying a home, or that they were not interested in buying a home. The most common reason for this was that the respondent felt they could not afford to buy a home. This was at least one of the selected reasons for 43 per cent of the respondents.

Meanwhile, 24 per cent of the respondents were waiting for their personal financial situation to stabilise, and 19 per cent were waiting for home prices to fall. The respondents could select as many reasons as they wished, and respondents could also freely describe what would make them interested in buying a home.

"If banks offered loans to people with low incomes, but that doesn't happen," said one respondent.

If you have never had a home loan, you might have various preconceptions about them. We asked Anna Niinimäki, OP Financial Group's Head of Collaterals and Digital housing, if these preconceptions were true.

No permanent job – is it pointless to apply for a loan?

Many people wonder if an applicant must have a permanent job to get a home loan. What income-related matters does the bank look for when a customer applies for a loan?

"A permanent job is no longer a mandatory requirement for a loan. Certain industries have long fixed-term contracts which the bank considers the same as a permanent employment relationship. When making a loan decision, the bank looks at the applicant's employment history and assesses their future prospects. The most important requirement for granting a loan is the customer's repayment capacity, which is strongly related to what kind of home is being bought, and if the plans are realistic," says Niinimäki.

Banks also chart housing costs when assessing repayment capacity, as housing costs can change when moving from a rental apartment to an owner-occupied home. In an owner-occupied home, you do not need to pay rent, but you do need to pay monthly loan instalments, electricity and water charges, and in the case of housing companies in apartment blocks or terraced houses, maintenance charges and any housing company loan payments.

"The loan servicing costs can be estimated quite well in advance with the loan calculators available online, and it's a good idea to use the calculators. It's important to understand what you're committing to when buying a home, and what the total costs of living in the intended home will be."

No savings – no home loan?

If you have never been in home loan negotiations, you may also have misconceptions of the savings required for a loan. Can you get a home loan without savings? If not, how much do you need in savings?

"Savings are beneficial when applying for a home loan. Savings show that the applicant has had more income than expenses, and they also show that there is a long-term focus in the applicant's planning of their personal finances. But the big picture is what matters in the end," says Niinimäki.

Often, several solutions are available, even if the applicant does not have tens of thousands of euros in savings.

"In most cases, customers don't need to give up on their homebuying dreams if their plans are otherwise realistically in line with their repayment capacity and finances," says Niinimäki.

However, Niinimäki recommends starting to save early and regularly keeping track of savings.

"The best place to start planning is to write down your income and expenses. It helps you critically examine whether you could cut some of the expenses. A typical expense for many young people comes from various streaming services that can cost a fairly significant total amount each month," says Niinimäki.

Saving is always a good idea, even if the amount is small, and even if you are not planning to buy a home. People buying their first home can make use of the state-subsidised ASP saving, which is now even more favourable for prospective first-time homeowners after changes to the system in 2023. ASP account savings are subject to a good deposit interest rate and an additional interest rate paid when buying a home.

My dream home is still too expensive for me – should I just keep saving?

When you start looking for a home to buy, your dreams may end up bigger than when you started. Sometimes, the bank concludes that it cannot grant a sufficient loan for your desired home. How does the bank decide how big a loan it can grant to each applicant?

"It's extremely important for the intended housing plan to be realistic. This is what the bank wants to confirm with the customer during the negotiations. A loan in the right amount is beneficial to both the customer and the bank. The bank wants to ensure that the customer can repay the loan and has money left over for other living costs," says Niinimäki.

The appropriate loan amount is calculated with the customer as part of the loan negotiations. The calculation also takes the fact that interest rates can change into account.

"Even during the zero-interest years, home loans were tested with an interest rate of six per cent because interest rates can always change, as we have seen in recent months. Home loans are typically repaid over such a long time that surprises may occur in people's lives. Their families may grow, and their work situations may change."

There are also various regulations governing granted loans, related to terms such as the maximum loan terms. The foremost reason for the regulations is to prevent consumers incurring excessive debts.

My family isn’t rich, so how can I arrange for collateral?

If buying a home is not very common among your friends and family, you might easily think that you cannot afford a home. However, the financial situations of your close relatives are not discussed at loan negotiations. For example, your family's financial situation is only relevant to loan negotiations if the family's property is used as collateral for the loan.

Otherwise, the loan amount and required collateral are determined by the bank's general lending policies and regulations. When making a loan decision, the maximum loan-to-value ratio is determined, which reflects the relative value of the loan and collateral when the loan is granted. This affects the amount of the loan you can receive. In accordance with the maximum loan-to-value ratio, the loan amount can be a maximum of 90 per cent.

"As a rule of thumb, the collateral value of a home is usually 70 per cent of its value," says Niinimäki.

If the home's collateral value is insufficient to cover the loan collateral by itself, additional collateral is needed for the loan. Additional collateral for a first-time homeowner could be their parents' home, for example, but that is not the only option. The most common additional collateral comes in the form of loan guarantee products, about which bank specialists can provide further information.

My spouse is unemployed. Is it impossible for me to get a loan?

In a long relationship, you will probably have times where the spouses have a different financial situation. One may be in permanent employment, while the other is unemployed. Can you receive a home loan in such a situation?

"If you're applying for a shared home loan, the household's income and expenses are assessed together. The general rule for loans is that the applicants must have a regular monthly income, and their financial situation must be balanced. If one of the applicants is unemployed, the situation is not optimal for taking out a loan," says Niinimäki.

"However, you can always contact your bank in any situation, and you can discuss the situation in full with a specialist."

Home prices are falling. Should I wait for a better time to buy?

Home sales are currently fairly slow, and home prices are expected to fall this year. This has made many prospective buyers consider their options. Should you even try to buy a home when prices are falling? Or would it be smarter to wait for the prices to fall further?

"The earlier you start saving for your home, the more likely it is that you'll be able to buy the home of your dreams. The developments of recent months have been surprising in many ways," says Niinimäki.

"Predicting the housing market is difficult, and it may be even more difficult to find the home of your dreams at just the right moment. Buying a home is one of the biggest financial decisions for people. In the long term, buying a home has been very worthwhile in Finland, and for the majority of people in Finland, their home is their most valuable individual asset.

Predicting when home prices will start rising again is also difficult.

"It's impossible to accurately predict. Right now, the supply for homes is good, and buying a home now may be very sensible, especially for people looking to buy their first home. Everyone needs a home to live in. Family situations change regardless of financial situations, and so do people's housing needs. If your own financial situation is balanced, you don't need to postpone moving or buying a home," says Niinimäki.

Some find it important that their home's value rises while they live in it, but not everyone places as much importance on increased value. If an increase in value is important for you, buying a home in a developing area is a good idea.

"The price development in big cities and in their immediate vicinity looks good in the long term. The development in rural regions is more uncertain. For many of us, a home is primarily for living, and only secondarily a financial investment," says Niinimäki.

Interest rates are falling. Should I wait for a zero-interest period?

We have just left behind an exceptionally long period of zero interest rates that lasted for years, during which no reference rates were paid on home loans. In the second half of last year, home loan interest rates rose rapidly, and they have yet to stop rising. Is it worth it now to wait for interest rates to fall or even return to zero?

"Many people felt the zero-interest period was a normal situation, but in the long term, negative interest rates are more of an exception. Predicting the fixed income market is difficult, but economists are currently predicting that the most significant interest rate increases will slow down," says Niinimäki.

It is good to remember that a home loan is usually taken out for such a long period that interest rates will probably fluctuate in both directions during the repayment period.

"Currently, the average term for a home loan is more than 20 years," says Niinimäki.

You can make interest rate expenses more predictable by taking out a loan with an interest rate cap or a fixed interest rate. In both cases, the possibility of the interest rate rising is limited. You can ensure your loan repayment and protect yourself from personal finance risks with various solutions that protect your home loan payments in the event of setbacks such as unemployment or illness.

Shouldn't you only buy a home when you have a stable relationship and a permanent job?

Many people put off buying a home until all parts of their life have stabilised. For example, when they have a stable relationship, a permanent municipality of residence and a permanent job. Should you wait for such a stable life situation?

"I suppose the question is whether you can plan your life down to the details. Of course, certain basic things should be in good shape if you want to buy a home. The most important thing is to have a sufficient and regular income," says Niinimäki.

When you buy a home, a good starting point is knowing that you will not be moving out of the home within the next two years.

"Effort and expenses are always involved in moving into a new home, such as moving expenses and transfer tax, so it's not a good idea to be constantly moving. When you move into a new home, you can also consider renting out an apartment instead of selling it. Especially in cities favoured by students and for smaller apartments, renting out an apartment can be a very worthwhile option.

What if I'm expecting to win the lottery?

According to the survey OP Financial Group commissioned from Taloustutkimus, 17 respondents said that they would buy a home only if they won the lottery. Is this a good strategy for buying a home?

"If you just wait for a lottery win, it's more than likely that buying your own home will remain just a dream. After all, in hindsight, buying their own home is like a realistic lottery win for many people. Buying a home often helps accumulate wealth," says Niinimäki.

Of the survey's respondents, 42 were so committed to being tenants that even winning the lottery would not make them interested in buying a home.

"I have no interest whatsoever in buying a home in any circumstances. I'm very happy with living as a tenant," said one respondent.

Conducted in January 2023, the OP Financial Group survey was answered by a nationally representative online panel of 18–79-year-old Finns (n=2,628). The survey was conducted for OP Financial Group by Taloustutkimus. The margin of error is plus or minus 2.0 percentage points.