Mortgage interest rate
Mortgages refer to loans taken out in order to purchase residential buildings, housing shares or real estate. Mortgages are one of the most common loans in Finland, and according to the Bank of Finland, at the end of 2019, Finnish households had taken out more than EUR 100 billion in mortgages.
The interest cost of a mortgage consists of a reference rate, bank’s margin, and different payment-related fees, such as billing or account management fees. The interest rates on mortgages have remained low for quite a long time. In July 2020, the average mortgage interest rate was 0.72%.
However, since the loan amounts in question are large sums of money, it pays off to compare the available mortgage offers and their interest rates and annual percentage rates to find the best option. You should also find out if you are entitled to either complete or partial tax deduction for the interest on your mortgage.
When a credit provider calculates the interest rate for a mortgage, they take into account various different factors. Being in a relationship or having more than one person repaying the loan may be beneficial to the applicant, because this means the loan will have two guarantors instead of just one borrower.
Applicants who already own a home are generally considered to be more reliable in terms of repayment than renters, but this does not mean that loans would not be granted to applicants seeking to purchase their first home. In this case, the offered interest rate may be affected by a state-issued guarantee which is offered to first-time home buyers in Finland.
A good repayment capacity tends to lower the individual interest rate, but especially when it comes to mortgages, location also matters. Granting a loan for a home in a larger city is a safer option for the credit provider, because if the apartment needs to be sold in the future, this will be significantly easier in a city than a smaller locality that does not attract new inhabitants as well. In other words, the estimated demand for the apartment is also reflected in the interest rates offered. It may either raise the rates or lower them.