Slaves of Finnish mortgages?
About 60% of Finns have savings, which indicates that most of us have higher income. However, borrowing is widespread in Finland: according to the Federation of Finnish Financial Services, more than half of Finns have loans (mortgages, consumer loans or student loans).
Although there may be more than one open loan, Finns will repay their loans relatively quickly. Especially a quick mortgage loan repayment is taken for granted and is not questioned – even if it might be worth it!
Neighbors have money to spend
It is a good idea to repay the loan on time to avoid higher interest costs. Those Finns who have mortgages spend about one-third of their disposable income on loan repayments and interest expenses. Of course, this means that there is not much money left to spend or to invest in other savings that could be more profitable for homes.
Finnish loan repayments are very high compared to, for example, Swedes: In a neighboring country, there is so much trust in the value of housing that the loan is only slightly repaid – in some cases, the bank only pays the interest on the mortgage . So Swedes can pay back their mortgages for 70 years, in big cities up to 125 years! In these cases, the debt is often passed on from one generation to the next with the inherited home.
Household indebtedness is very low in Finland compared to other Nordic countries. However, having a high leverage is not automatically a bad thing if you know that the debt can be paid off later, or if the interest rate is almost non-existent and an increase in the value of the investment is expected.
With more money left for consumption, you may not always need to take out consumer credit, which may have a higher interest rate than a mortgage.
Borrowing is worthwhile when interest rates are low
Private consumption is also a good stimulus for the national economy. Debt repayments to banks and low consumption levels of not increasing the economy. However, according to Statistics Finland, the confidence of Finnish consumers in the national economy and their personal economy has strengthened, and up to 67% of consumers now considered it worthwhile to borrow.
Even though loan money is really cheap right now, it must be remembered that over-indebtedness always entails risks. Therefore, debt should not be taken unduly and blind in the eternal value of the investment. The optimal model for borrowing and loan repayment is probably between Sweden and Finland.
In Sweden, too, banks’ loan repayment requirements have been tightened to prevent over-indebtedness: nowadays, new mortgages must also be repaid under certain conditions immediately, rather than merely paying interest on the loan to the bank.
Consideration for lending
Borrowing is very profitable in a situation where it brings flexibility to consumption and enables larger purchases. It is important to be aware of the total cost so that the debt can be repaid. It’s a good idea to compare loans before you decide to apply.
Many banks offer both mortgages and bank loans, such as Good Finance and Goodbank. The total cost of loans for different banks and financial institutions can be compared transparently from our price comparison:
However, a loan must always be taken prudently to avoid payment difficulties and debt rotation. Managing your own finances is easy, as long as you plan things in advance and think carefully about what you really need. For example, you can use Excel budget