Information about the cap on and the self-financing share of housing loans

The self-financing share of a home loan means the amount of the purchase price of a home that you can’t cover with the loan – it’s your contribution towards the cost of the home. The amount of the self-financing share depends on whether you’re a first-time buyer or have already owned a home.

First-time home buyers must have savings (in other words, a self-financing share) equivalent to 5% of the price of the home, or a corresponding amount of other collateral. However, if you are taking out an ASP loan to buy your first home, your savings or collateral must cover at least 10%.  

If you are selling your old home and buying a new one, you must cover at least 10% of the price of the new home with your own savings or other collateral.

What is the deposit in home transactions?

The deposit is the amount you pay up-front to the seller of a home as a sign of your commitment to buy the home.

Read more about making an offer on a home and paying your deposit

The self-financing share in a home loan, which is the amount the borrower has to provide in savings or collateral when buying a home, is determined by the loan cap set by the Finnish authorities. The Finnish Act on Credit Institutions states that a home loan can amount to a maximum of 90% (95% for first-time homebuyers) of the fair value of the collateral put up for the loan at the time the loan is granted.

The Finnish Financial Supervisory Authority is authorised to lower this loan cap by a maximum of 10 percentage points. Therefore, the Financial Supervisory Authority may lower the loan cap to 80%, or to 85% for first-time homebuyers. The loan cap was introduced in 2016. It has been lowered and restored to its original level twice.

When the loan cap is lowered, home loan applicants must have more savings to use towards buying the home. The purpose of this regulation is to prevent the housing market from over-heating and households from taking on too much debt. When applying for a home loan, you must have sufficient loan servicing capacity for your total loan amount, which is considered to cover both your existing loans as well as the home loan.

This regulation applies to a loan granted for buying a home in a housing company, a residential property, a holiday home or an investment property, or for carrying out a major renovation.

The amount of savings you need to obtain a home loan is determined by official regulations as well as by the banks’ own requirements for loan collateral.

Collateral means the assets the borrower pledges to the bank in case they are not able to repay the loan as agreed. The home you are buying is always the primary collateral. 

Nordea considers the security value of the home to be purchased to be 75% of its market value at the most. Therefore, you will need to cover 25% of the home’s purchase price with your own savings or other collateral. 

For example, if you buy a home for 100,000 euros, the collateral value is 75,000 euros; this is also the amount of the home loan you can take out with your home as the only collateral. If you need to take out a loan of more than 75,000 euros, you will need other collateral.