What should a young person know about a home loan?
Buying a home is one of the biggest steps in a young person’s life. In cooperation with Swedbank, we share knowledge and practical explanations to make the first steps in the real estate world informed and confident. Our junior real estate agent Markus Ein asked the bank directly the questions that young people most often ask, and we share the answers exactly as the bank explains them.
Do young people have a chance to get good loan conditions?
Recently, there has been an impression that it is more difficult for young people to get a loan. Swedbank emphasizes that buying a new home is a major and important event for young people, and the bank aims to make the process as smooth and simple as possible. Applying for a home loan is actually simple and can be done conveniently through internet banking.
In addition, the bank has created a separate team that deals specifically with applications from young clients. They are very familiar with the most common questions and concerns of young people and can explain topics clearly, give concrete answers, and encourage young people to ask additional questions.
To receive a loan, a person needs a regular and sufficient income from which monthly loan payments can be made. A home loan should help a young person improve their life, not create additional stress. Swedbank always aims to make the best possible offer. The offer is mainly based on the applicant’s income, previous payment behaviour, and the property being purchased. If desired, insurance is also offered to help reduce risks in unexpected situations.
Are military service and a home loan compatible?
Mandatory military service does not exclude the possibility of receiving a home loan. The important thing is to think through how loan payments will be made during the period of military service. Often, the loan agreement includes another party who makes the loan payments from their bank account during that period. Planning and a well-thought-out solution are the key factors here.
Down payment, parental support, and the EIS guarantee
Generally, the minimum down payment is 10% of the property’s value when using an EIS (formerly KredEx) guarantee. This option is intended for groups such as young families, young specialists with vocational or higher education, and buyers of energy-efficient property. Without the EIS guarantee, the minimum down payment starts at 15%.
It is important to know that the EIS guarantee is not a grant, but a state guarantee for the bank. The maximum amount of the guarantee is up to 24% of the collateral value, but not more than €20,000, and for energy-efficient property up to €50,000. A one-time fee of 3% of the guaranteed amount must be paid for the guarantee.
In practice, it is increasingly common that young people have saved the required 10% down payment themselves or have received part of the money from their parents. Parents’ property is still sometimes used as collateral. This can be done if the bank is confident that the parent would be able to buy the property out of the loan if necessary.
Miston Real Estate junior broker Markus Ein
At what age do people typically get a home loan?
People take out home loans at all ages. If a person has a regular income, has saved a sufficient down payment, and wishes to buy property, the transaction will most likely take place. About a quarter of borrowers are under 30 years old, and the average borrower is 35 years old. Almost every tenth borrower is 25 years old or younger.
In general, it is always a good time to buy a home. There is no need to be afraid of a long mortgage schedule, because a home purchased with a loan can always be sold if necessary, and a new home can then be bought. Often, the value of real estate increases over time, which allows the purchase of the next home with a larger down payment.
Young couples and shared responsibility
When young people take a home loan together, the income of both partners is considered when granting the loan. This often makes it possible to take a larger loan. On average, a home loan is taken for 26 years, and during this time a person’s job, income, and even family situation may change.
A home loan does not lock a person into one solution. The property can be sold, exchanged, or rented out if necessary. Loan terms can also be adjusted over time.
If the couple separates, there are several ways to resolve the situation. One option is to sell the jointly purchased home, repay the loan, and divide the remaining money from the sale equally or according to the original contributions. Another option is that one party buys out the other’s share and continues paying the loan alone. If necessary, the loan amount can be increased to pay compensation, provided that the person taking over the loan has sufficient financial capacity.
More rarely, situations occur where one party leaves the loan agreement without ownership or compensation. This may happen if they have not contributed to loan payments, the family budget, or the down payment.
Vagabondi Lofts in Pärnu “illustrative image”
New development or secondary market?
The choice of which type of real estate someone wants to live in is primarily a personal decision. In the case of a more energy-efficient home, the loan margin may be slightly lower, but the price per square meter of such property is often higher. For both the person and the bank, the most important factor is that the loan remains affordable in the long term.
Swedbank’s loan statistics show that 57% of purchased apartments are located in buildings constructed before the year 2000, 28% in buildings built between 2000 and 2023, and 15% of borrowers have bought an apartment in a newly built building.
What happens if payment difficulties arise?
This is a serious situation and something that should be considered already when taking the loan. It is wise to think through a possible plan B. When signing a home loan agreement, it is possible to consider loan payment insurance, which can provide relief in unexpected situations.
If payment difficulties begin to arise, it is important to contact the bank as early as possible. Together it is possible to review the situation and find a suitable solution, for example applying for a principal payment holiday. If it becomes clear that the difficulties may last longer, the borrower has the option to sell the property and replace it with a more affordable home.
The courage to ask is the first step
Swedbank encourages young people to contact the bank even before finding a specific home. During the consultation, the bank helps create a clear understanding of what price range would be reasonable to consider. First-time home buyers often focus only on the loan payment, but the real cost of a home also includes utilities, insurance, and maintenance expenses. In addition to the down payment, it is also wise to have a small financial reserve for unexpected costs.
At Miston’s new development customer days, we have also invited Swedbank consultants so that interested visitors can receive professional advice on home loan possibilities on site. Cooperation between the developer, the real estate agent, and the bank helps the client better evaluate their borrowing capacity, understand monthly costs, and make decisions that match their real financial ability.
Miston Real Estate agent Markus Ein sees every day that awareness creates confidence. When a young person understands how the bank evaluates their situation and what the real possibilities are, the process of buying a home becomes much clearer. In cooperation with Swedbank, we want to bring this knowledge closer to young people so that buying a first home would not feel like a frightening leap into the unknown, but rather a well-considered step toward the future.
Explore your possibilities and receive a personal offer here!
Swedbank consultants at the Vagabondi Lofts customer day
