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Home ownership has traditionally paid off in Finland

According to Nordea Economist Juho Kostiainen, home ownership has been more financially viable than renting a home over the long term even though the monthly expenses are usually a little higher. However, a longer loan period can reduce the monthly repayments on a home loan.

In Juho Kostiainen’s comparison of one-bedroom flats in the Greater Helsinki area, the monthly repayments for a homeowner are currently close to the cost of renting if the home loan period is 40 years.

“The rent is roughly the same as the monthly payments on a home fully financed with debt, including interest, maintenance charges and instalments on a 40-year loan repaid in equal payments. However, the actual cost of home ownership is lower if loan instalments are regarded as saving,” says Kostiainen.

Renting or buying – which makes more sense?

You should consider buying your first home when you have a regular income and the necessary amount of savings for applying for a home loan and buying a home.

When you live in your own home, you pay ‘rent’ to yourself. Furthermore, you can benefit from any increase in the value of your home, depending on its condition, the development of the residential area and the housing market situation.

“Over the longer term, prices have risen particularly in growth centres, even though home prices have fallen for the past four years. Finland’s improving economy is expected to feed through to the housing market with a delay and be reflected in rising home prices,” says Juho Kostiainen.

Long-term calculations also support the case for home ownership. Juho Kostiainen has drafted a calculation of costs of renting and owning a typical one-bedroom flat in the Greater Helsinki area in 2006–2025.

A calculation of costs and benefits of renting and owning a one-bedroom flat in the Greater Helsinki area in 2006–2025

The calculation shows that between 2006 and 2025, a tenant would have paid a total of 203,544 euros in rent. This is 1,172 euros more than the combined loan instalments, interest and maintenance charges paid by a homeowner.

Over the same period, the homeowner’s wealth would have grown to 179,795 euros when the increase in the value of the property is also taken into account. The tenant’s wealth would not have increased at all.

Example calculation
CalculationRental home in 2006–2025Owner-occupied home in 2006–2025
Rent203,544 euros
Maintenance charge49,459 euros
Interest expenses46,031 euros
Repayments106,882 euros
Cash flow203,544 euros202,372 euros
Value appreciation72,931 euros
Wealth (value appreciation + repayments)0 euros179,795 euros

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Various forms of housing

Read more about the differences of various forms of housing

Apartment in a housing company
Single-family home
Right-of-occupancy home
Rental home

Apartment in a housing company

If you buy an apartment in a housing company, you buy the shares that entitle you to occupy a home usually in a block of flats, a terraced house or a semi-detached house. When buying shares in a housing company, you also have to pay asset transfer tax.

You will pay a charge for common expenses each month which may consist of a maintenance charge and a charge for financial costs. The housing company’s expenses are covered with the maintenance charge. With the charge for financial costs, you will pay your share of the housing company loan taken for renovation. In the case of new residential buildings, the repayment of your share of the charge for financial costs may begin only after a few years.

In addition, you may need to pay for water, a parking space and the building sauna and a plot rent.

You can also carry out small refurbishments, such as putting up wallpapers or painting the flat. You’ll need the housing company’s permission, and possibly a building permit, for larger renovations. On the other hand, the housing company is responsible for the condition of the buildings and flats.

Single-family home

Buying a single-family home means that you buy a property consisting of an area of land and buildings. The house can also be located on leased land. When you buy a single-family home, you have to pay asset transfer tax in addition to the purchase price.

Living in a single-family home means that you pay for the maintenance, repairs and renovations of your home. In addition, you pay for heating and waste management in addition to property tax and a plot rent, if applicable.

As an owner of a single-family home, you are responsible for keeping your home in a good condition and carrying out the necessary repairs. You are also responsible for maintaining and renovating your property as well as financing these expenditures.

Right-of-occupancy home

Right-of-occupancy is a form of housing in-between a rental flat and a home of your own to which you own the right of occupancy as the resident.

You will have to pay a charge on the right of occupancy which will be refunded, revised with the construction cost index, after you move away. When you live in a right-of-occupancy home, you pay a monthly maintenance charge. In addition, you may need to pay for water, a parking space and the building sauna.

The owner is usually responsible for the maintenance of the home, but you can carry out maintenance work and repairs. However, you’ll need the owner’s permission for any alteration work.

Rental home

When you rent a home, you can live in the home either for a fixed period or until further notice according to the rental contract. A fixed-term rental contract binds both the landlord and the tenant for the agreed period, whereas an ongoing rental contract can be terminated by the tenant with a notice period of one month.

When you are moving to a rental home, you usually pay a rental security deposit that equals one to three months’ rent. The rental security deposit will be refunded to you after the expiry of the rental contract if the home is in a good shape. In addition to the monthly rent, you may need to pay for water, electricity, a parking space and the building sauna.

The financial risk related to renting a home is often smaller, as you are not liable for renovations made by the housing company, for example. The landlord is responsible for the general tasks related to the maintenance of the home. For example, if your stove or fridge breaks down, your landlord is responsible for getting you a new one.

On the other hand, if you want to carry out small refurbishments, such as painting the walls, you’ll need to obtain the consent of the landlord.

The home loan is granted by Nordea Bank Abp.

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