Mortgage in Finland to Become More Accessible

Since 2022, the Finnish government has been actively advancing housing policy reforms in response to challenges in the real estate market: declining demand, rising interest rates, and a slowdown in construction.

Key reasons for the downturn:

• A sharp increase in the ECB’s key interest rate since mid-2022 significantly raised mortgage costs — the rate climbed from –0.5% to around 4% by mid-2023. This represents a rise of over 4 percentage points in just one year. ECB
• Rising prices of construction materials and energy due to inflation have made building new homes more expensive.Tilastokeskus
• Declining consumer confidence caused by economic instability and unemployment: the Consumer Confidence Index (CCI) stood at –8.8 in May 2023 and –8.6 in June 2025, with 56% of respondents expecting unemployment to rise. Tilastokeskus 2023, Tilastokeskus 2025
• Decline in Secondary Housing Market Transactions: in 2023, the number of deals fell by 24.5%. Helsinki Times, Eurostat

On June 30, 2025, the Ministry of Finance (Valtiovarainministeriö) published a new proposal to amend regulations concerning mortgage lending and housing company loans. The goal is to stimulate the real estate market, simplify changing homes, and improve the accessibility of housing finance. Public consultation will continue until August 24.

1. Extending the maximum mortgage term to 35 years

This refers to a proposal by the Finnish Ministry of Finance to amend current housing loan regulations, specifically to extend the maximum permissible repayment period for new mortgages from 30 to 35 years. The mortgage repayment period is the timeframe during which the borrower must fully return the entire loan amount, plus interest, to the bank. In Finland, this term is currently legally capped at 30 years, even if both the bank and the client are willing to agree on a longer period.

What This Means in Practice:

• Lower monthly payments for the borrower. When the loan term increases, the payment amount decreases as it's "stretched" over more years.
• Ability to take out a larger loan with the same income.
• Increased housing affordability, especially for younger buyers whose incomes might be lower but stable. People with less income will be able to get a larger loan because the bank will consider the lower income burden.
• Easier to sell or change homes. Longer terms make it simpler to finance the transition from one property to another.
• Higher total interest overpayment. The longer the term, the greater the cumulative amount of interest paid to the bank.
• Higher long-term debt burden, which is particularly risky if income decreases or life circumstances change.

Example. Calculation for a €200,000 Mortgage at 3.5% Annual Interest:

The monthly payment is €66 lower, meaning a reduced monthly burden, but the total overpayment is €26,217 higher.

2. Increasing the maximum loan-to-value (LTV) ratio to 95% for all borrowers

The loan-to-value (LTV) ratio is an indicator reflecting the portion of a property's value covered by a mortgage. A higher LTV means the buyer needs less of their own funds, but it also increases the risk for the bank.
Example: If an apartment costs €200,000 and you take out a mortgage for €180,000, the LTV is €180,000 / €200,000 = 90%.

According to current regulations from the Finnish Financial Supervisory Authority (Finanssivalvonta, FIVA) the maximum LTV (Loan-to-Value) at present is:

• 95% for first-time homebuyers (ensiasunnon ostajat) only.
• 90% for all other buyers.
• The remaining 5–10% of the property's value must be paid by the buyer from their own funds—through cash, subsidies, loans secured by other assets, etc.

The Financial Supervisory Authority (Finanssivalvonta) will, in the future, be able to discretionally permit an LTV of up to 95% for all buyers, not just for first-time homebuyers. Important: This is not about an automatic increase of the limit, but rather about providing the Financial Supervisory Authority with a flexible tool. This tool will allow them to temporarily adjust the LTV based on market conditions—raising it during a downturn and lowering it during an overheated market.

What This Means in Practice

• Lower down payment requirements.
• Increased flexibility for existing homeowners. It simplifies changing homes: having sold their old property, they need to save less for a new one.
• Higher risk of debt burden for households with unstable incomes.
• Smaller financial “safety cushion”: if housing prices fall, there is a risk of negative equity (when the loan exceeds the value of the property).
• Increased indebtedness in the economy. Finland is already among the EU countries with a high level of household debt.

Example Calculation for a €250,000 Mortgage:

Difference: €12,500 less in own funds is required.

3. New restrictions on housing company loans (taloyhtiölainat)

A housing company loan or Taloyhtiölaina is a collective loan taken out by the developer or housing company (taloyhtiö) for an entire apartment building, especially common in new constructions.

• The apartment buyer doesn't take out a mortgage directly. Instead, they buy the apartment with a "share in a collective loan."
• This share is called huoneistokohtainen osuus yhtiölainasta, which translates to "housing-specific share of the company loan."
• Later, the buyer repays their share through monthly installments (yhtiövastike/rahoitusvastike).
• Initially, an interest-only period (lyhennysvapaa) is often provided, during which no principal payments are required.
• The debt doesn't show up on the buyer's personal credit history because it's formally the housing company's debt.

The problem with these loans is that they distort the true cost of housing and create a hidden debt burden. Buyers often don't realize the full extent of this debt, which can lead to a sharp increase in payments after the interest-only period ends or if interest rates rise.

What Does the Reform Propose?

Limiting the Loan Share:

• Currently, developers can finance up to 60% of apartment costs through a collective loan (a restriction in place since 2023).
• The proposal is to establish a flexible limit of 60–70% of the debt-free price.

Limiting the Interest-Only Period (lyhennysvapaa):

This is a period (typically at the beginning) during which buyers (the housing company) only pay interest and don't amortize the principal debt.

• Previously, these periods could last for 3–5 years, sometimes even 5–7 years. According to 2023 amendments, the interest-only period is capped at a maximum of 12 months after construction is completed.
• It's now proposed to grant the Financial Supervisory Authority (Finanssivalvonta) the right to flexibly regulate this period, setting it within 1–2 years depending on market conditions.

What This Means in Practice:

• The interest-only period could again become longer than the current 12-month limit, but only in exceptional cases if the market needs support.
• The initial financial burden on the buyer will be lower, which may stimulate demand for new-build homes.
• There's an increased risk of debt burden for households with unstable incomes.
• After the interest-only period ends, monthly payments could rise significantly, especially if rates increase—this heightens risks for those with unstable incomes.
• It offers increased flexibility, but with the maximum term limited to 1–2 years to avoid a return to the old practice of 3–5 year interest-only periods, which often distorted the perceived true cost of housing.

Limiting the Maximum Repayment Term: 30–35 Years

Previously, the repayment term for housing company loans (taloyhtiölaina) could extend up to 40 years in some projects, effectively turning apartment ownership into a long-term lease. However, as of July 1, 2023, the maximum repayment term for these loans was limited to 30 years. The Ministry of Finance's new initiative, however, allows for the possibility of flexibly extending this term up to 35 years, depending on the economic situation. (Valtioneuvosto)

Key implications and significance of the proposed changes

So, the proposed changes are designed to make Finland's mortgage regulation more flexible and better adapted to the economic situation and market needs. It'll be easier for buyers to get financing and change homes, primarily due to the increased maximum loan term and the higher allowable loan-to-value (LTV) limit. At the same time, introducing differentiated restrictions on housing company loans (taloyhtiölainat)—which consider market conditions and controllable parameters like loan limits, interest-only periods, and repayment terms—will ensure greater transparency and reduce the risk of hidden debt accumulating at the household level. Collectively, these measures aim to support the housing market and stimulate demand while maintaining control over systemic financial risks, which is crucial for the overall stability of the financial system.