Finns Love Real Estate: Why Buying a Home in Finland Makes More Sense than Renting
Buying a home in Finland is a big deal. Finns love owning their home and want to do it as early as possible. This differs in a lot from many other European countries, where people are more content to rent.
So, why does buying a home in Finland make more sense than renting? There are a bunch of reasons, so let’s dive into it a bit deeper. You can also check out my YouTube video all about this topic to learn more.
Government Incentives for Buying a Home in Finland
There are a variety of government programs and incentives that make buying a home in Finland easier. These things are not related to buying property in Finland as a foreigner, as you need to be a Finnish citizen to be eligible.
Here are three main ways the government helps Finns purchase property:
1. Tax deductions
Mortgage interests have been a tax-deductible expense in Finland for many years, which made a lot of sense in the 90s when interest rates were high.
Unfortunately, this plan is no longer in effect starting in 2023. Today, the rates are lower, so it’s not as necessary… plus, the state needs to save some money. However, this rule allowed many people to buy a home in Finland, and it became a more common practice.
2. ASP scheme
ASP comes from “Asuntosäästöpalkkitotili,” which is a bonus for homeowners. It was founded in the 1980s to incentivize people to save for their home. Basically, you need to save 10% of the value of a home, and the bank will give you a loan for the remaining 90%.
The 10% needs to be saved over 8 calendar quarters. The amount saved has to be €150-3,000. Thus, the minimum time to save for ASP is two years.
For example, you have a home valued at €100,000. This means:
- You need to save 10% of the total amount, or €10,000.
- This translates to €1,250 per quarter for two years (8 quarters).
The two years is just the minimum amount to save the 10%, and you can stretch it out longer if you need to. Since you can take as long as you need to save 10%, it encourages young people to start saving for their first home.
The benefits of the ASP scheme include:
- 1% annual tax-free deposit interest.
- 4% tax-free bonus interest on an ASP account for the opening year and five more years.
- State guarantee free of charge.
- Interest subsidy if the rates increase.
3. First-time buyer
When you’re buying your first home, you have additional benefits. First-time buyers are exempt from paying a transfer tax (“varainsiirtoverto”). Transfer taxes are 2% for flats or row houses (housing shares), or 4% for houses. First-time buyers do not need to pay this, which can save them a significant amount when buying a home in Finland.
Additionally, first-time buyers only need to put down 5% for the payment instead of the typical 15%. This makes buying a home in Finland much easier, especially for young people starting out with their careers.
To qualify as a first-time home buyer, you need to meet the following criteria:
- 18-39 years old when you sign the contract.
- At least a 50% share of ownership after your purchase.
- You use your purchase as a permanent home and move in within 6 months of signing the contract.
- You have not previously been a homeowner (at least 50% ownership) of a house or apartment.
Read more details on Finnish Tax Administration’s website
Financial Benefits of Buying a Home in Finland
In addition to government benefits and incentives, several important financial reasons make it worth purchasing real estate. These are reasons that buying a property in Finland as a foreigner might also be worth it to you!
The three main financial benefits are:
1. Household deduction
There are eligible tax credits if you pay for work to be done in your home, such as childcare, cleaning, renovations, or installations. You can claim 40% of these things in your home, up to a maximum of €2,250 (in 2022) per person.
This is a major benefit to homeowners because renovations can increase the value of your home. So, you get two benefits here: higher equity through renovations and tax-deductible expenses while doing so.
2. Increase your wealth
One of the biggest benefits of buying a home is that you are building your wealth. Instead of paying rent to someone else, you increase your net worth every time you make a mortgage payment. You always have to live somewhere, so this is a good way to build wealth.
You do need to think about some of the risks and downsides, too:
- Renovations can be costly and time-consuming.
- Interest rates can vary greatly, and you may pay more to the bank.
These are risks that homeowners need to be aware of and prepare for before buying a home in Finland.
3. Price Appreciation
In many areas, especially Helsinki and other cities with increasing populations, housing prices increase. This means that the value of your home goes up, ultimately making you wealthier.
But remember, some cities and areas have depreciating houses—people are moving out of the area, and prices are going down. So, when you choose where to buy, consider whether it will appreciate or not. There are so many factors that influence this, too, including the general economic state of Finland at the time and the demand for homes in the area.
An example of how appreciation can increase your wealth:
- You purchased a home for €100,000; the down payment was 10% (€10,000), and the mortgage is €90,000.
- After 5 years, you put €10,000 towards the mortgage, leaving the balance at €80,000.
- At the same time, the price of the home increased to €120,000.
- €20,000 value increase + €10,000 mortgage payments = €30,000 wealth increase.
This doesn’t include interest, renovations, or maintenance, but you can see how appreciation can help build a place.
4. Selling Your Home Tax-Free
If you want to sell your home to move somewhere else, you need to understand how the taxes work. In Finland, you typically need to pay a capital gains tax of approximately 30% or 34% of your profit.
However, if you have lived in your home for at least two years, you can sell it without paying taxes on your profits. You can keep the money, then, and use it to purchase something better.
In Finland, this is the concept of “asuntohissi” (apartment elevator). You purchase a home and enter the elevator—a symbol of wealth—which increases slowly. Then, you get off the elevator as you sell and use the profits to finance something better… The elevator keeps going up!
Keep in mind that this explains the best-case scenario. There are some risks to buying a home in Finland, especially if there are some tough economic times. However, becoming a homeowner is often a good way to increase your wealth over time.
Emotional Reasons for Buying a Home in Finland
The last reason Finns love to buy a home is because “kotini on linnani,” or, “my home is my castle.” It’s a Finnish phrase that expresses how deeply we value owning a home—it’s your safe haven and provides a sense of stability and predictability.
We have another Finnish saying, “oma tupa, oma lupa,” which means “own home, own permission.” Basically, you can do whatever you want! If you own your own home, you can decorate or renovate it the way you want.
Finally, purchasing a home is a sign of independence. It’s a milestone that shows you are financially stable and doing well.
Is it Easy to Buy a Home in Finland?
Purchasing a home is pretty simple. First, you get your loan permits from the bank, and then you can start looking at homes to purchase. The bank and real estate agent will do all the heavy lifting for you—you don’t even need to leave your house to sign papers to buy a home!
Buying a home in Finland is a big deal, and many people want to own their house. That said, renting is sometimes the best choice for you in your situation. Whatever way you go, you have to make the best choice for your circumstances.
If you’re interested in Finnish life, language, and culture, make sure you check out my other videos on my YouTube channel!