You may be eligible for a goverment guarantee for your housing loan if you buy at least 50% of the apartment and you will be using the apartment as your permanent dwelling. The apartment may be an owner-occupied flat, detached house or a detached house that you are going to build or have built.
The amount of the loan may be up to 85 per cent of the purchase price of the apartment or 90 per cent of the purchase price if you are utilising an ASP interest subsidy loan.
The guarantee may be granted for a maximum loan period of 25 years calculated from the date that the loan or its first instalment is raised. You are eligible for an instalment-free period of up to two years, if you are unable to pay your loan due to illness, unemployment, family leave or similar economic reasons.
You do not need to apply for the government guarantee separately. Instead, it is granted at the bank in connection with granting the housing loan.
A guarantee fee for the government guarantee is charged in connection with raising the loan or the first instalment of the loan. The fee is 2.5 per cent of the amount of the government guarantee. No guarantee fee is charged for ASP interest subsidy loans.
An example of the guarantee fee: Purchase price of the apartment €100 000 Home ownership loan (85% of the purchase price) €85 000 Amount of the government guarantee (up to 20% of the amount of the loan) €17 000 Guarantee fee (2.5% of the amount of the state guarantee) €425
Purpose of the loan
Building a detached house or purchasing an owner-occupied apartment is always required for eligibility for the government guarantee. A government guarantee cannot be awarded for a loan that is used to fund
- the right-of-occupancy fee for right-of-occupancy housing
- a renovation or basic improvements
- a complementary building or extensions.
Government guarantees are only available for remodelling if the cost corresponds to the costs of building a similar new building. This may be the case when the footing of an old building is utilised for a new building.
Government guarantees are only awarded for the purchase of a permanent dwelling. A section of the apartment may be given to the use of a person who is not a family member, as long as most of the apartment is used by the owner. A person may only have one permanent dwelling.
Loans for purchasing a second residence or an investment property are not eligible for the government guarantee. Investment properties include student apartments registered in the parents’ name or apartments rented to non-family members.
Any apartment purchased using the home ownership loan must be located in Finland. The apartment may not, however, be located in Åland, which has its own guarantee system.
The apartment must be located in an area where all-year residence is allowed.
The government guarantee is available for shares or stakes in a housing company, housing co-operative or mutual real estate corporation. It cannot, however, be granted for shares in a real estate corporation.
A garage share serving the use of the apartment may be connected to the apartment if it is bought at the same time as the apartment.
A detached house is a building with only living quarters. It may include an outbuilding, sauna, garage or other premises closely related to living, if they are minor in relation to the size of the detached house. The area of the plot may be up to one hectare in sparsely populated areas and up to the size of the construction site designated for the area in the land use plan in an area with an urban status.
If the real estate to be bought includes a horse stable, hall building or other premises that are not connected to housing, their share must be itemised in the bill of sale. They cannot be funded using a home ownership loan.
Any premises that are not in residential use at the time of the purchase (e.g. summer cottages, schools or commercial premises) cannot be considered detached houses. The use must be altered before the apartment is acquired using the home ownership loan. Any alterations of the use by the purchaser bear no significance on the matter.
Building a detached house
The cost estimate for the construction of the detached house provided to the bank is considered the purchase price of the detached house. The estimate should be calculated carefully, because an approved cost estimate may only be changed if the general price level changes.
The proportion of one’s own work is not included in the cost estimate, because it does not add to the amount of the required loan. The purchase price of the plot may be included in the estimate, if the plot is acquired as part of the construction project and funded with a loan that is both raised at the same time and a state guarantee is applied to it. In this event, construction must start within six months of purchasing the plot.
Construction is deemed started when the casting of the foundation is started or the installation of the foundation structures is started. Preparatory work (such as excavation or felling trees) is not considered starting construction.
You can be granted a short-term loan for the purchase of the plot, but even then you must observe the six-month rule, i.e. you must start construction within six months of purchasing the plot.
Government guarantees cannot be applied to loans that are used for the funding of initial equity required by joint construction projects in housing company form. The government guarantee can, however, be applied to the section of the company loan paid after the building is finished.
The company loan can be deemed a part of the purchase price, if the company loan is recorded in the bill of sale or documented in another reliable way in writing. The prerequisite is that the share is paid to the company as soon as possible.
The company loan share must be valued to the apartment in accordance with the graduation grounds specified in the articles of association of the company. The total funding must be agreed at the time of the sale. The apartment-specific share of the plot cannot be covered by the home ownership loan with a government guarantee.
Any fixed additional and renovation work directly related to the apartment and commissioned by the purchaser can be calculated as part of the overall price of the apartment. The bank must verify the renovation work in a reliable manner, and the documents verifying the renovation work must be attached to the bill of sale.
The use of the government guarantee for sections of the loan raised at a later time must be agreed in the loan negotiations at the time of the start of construction. This means that the government guarantee cannot be applied to the loan after the loan has been raised. Even if the initial equity is funded using own funds, the final loan must be agreed when own funds are used to start the project and construction is started.
The bank must contact the State Treasury before applying the government guarantee to housing loans concerning other types of joint building projects.
Transferring the loan
You may transfer a government-guaranteed loan to a new apartment, if you are using the loan to pay for your personal permanent dwelling. You must own at least 50 per cent of the new apartment.
It is recommended that the purchaser sell their old apartment before buying the new apartment in cases where they are transferring the loan. If you sell your apartment, the new apartment must be purchased within a reasonable amount of time. Six months calculated from the sale of the old apartment is considered a reasonable amount of time.
If you have not purchased the next apartment or started construction within six months, you may apply for a six-month extension on the validity of the loan from the State Treasury. The application must arrive at the State Treasury before the initial six months have elapsed.
Up to 85 per cent of the purchase price of the new apartment may be covered by the government-guaranteed home ownership loan. The government guarantee may account for up to 20 per cent of the remaining principal of the home ownership loan.
The existing loan must be transferred to the new apartment as is in terms of the amount of principal and guarantees. If the maximum loan amount of 85 per cent has not been raised, you may be eligible for more government-guaranteed loans. However, the bank must ensure that the maximum amount of the guarantee is not exceeded.