When is the right time to buy a home?

Are you thinking about buying your own home? The housing market situation varies, but generally it makes sense to buy a home when your future plans are clear, you have saved up the down payment needed for a mortgage, and your financial situation allows for regular loan repayments. Below, we’ve gathered six questions to help you reflect on whether the time is right for you to purchase a home.

1. Do your future plans align with your housing dream?

Do you dream of owning a home? Do you want to settle down, start a family, or create a stable base for your life? If you have long-term plans and want to start building your own wealth, buying a home can help you achieve those goals.

That said, homeownership is not always necessary or the best option for everyone. Each person’s situation is unique, and the decision should be based on your own needs and financial circumstances.

If planning years ahead gives you peace of mind, you may already be mentally ready to buy your own home. And remember: your first home doesn’t have to be forever.

2. Can you make regular mortgage payments?

Before you start searching, evaluate your financial situation. What are your current earnings? Could you make mortgage repayments every month? If you spent up to 50% of your income on housing, what kind of lifestyle would you have with what remains?

When renting, you’re effectively paying off someone else’s mortgage, while mortgage payments for your own home build your wealth. That’s why it usually makes sense to buy when you have steady income and can plan your future several years ahead.

3. Do you have the down payment saved?

Getting a mortgage usually requires savings—your own contribution or down payment. The required percentage is set by law.

As of May 2023, buyers using the ASP scheme for their first home need savings of 10% of the purchase price. First-time buyers saving in a regular account or fund account need 5%. Other homebuyers need at least 15% of the purchase price as savings or collateral. Ask your bank—or Olas—for details. Through Olas’s banking contacts, you can get more information about mortgage options.

Banks price loans based on individual risk assessments. The larger your down payment, the lower the risk from the bank’s perspective. That usually means larger and/or cheaper loans. However, trying to grow your savings while renting isn’t always sustainable—especially if more of your money is going to your landlord than into your own savings.

4. What are interest rates like?

Many wonder when the best time is to buy a home in terms of interest rates.

During loan negotiations, your bank will run a “stress test” to see whether you could handle repayments if rates rose to, say, 6%. If the bank approves the loan, it’s a sign they believe your finances can handle even higher rates.

You may also opt for an equal-payment loan, where repayments remain exactly the same regardless of rate changes. If rates rise, the term becomes longer; if rates fall, the term shortens. This can make budgeting easier if you don’t want surprises.

Recently, interest rate prospects have improved for buyers: rates have started to fall and inflation has slowed more than expected.

In the future, falling interest rates may increase housing demand and push prices higher.

5. What is the transfer tax level?

When you buy a housing company share in Finland, you pay a transfer tax of 1.5% of the debt-free purchase price. This was previously 2%, but the government decided to cut the rate by a quarter starting 12.10.2023 to encourage home buying. For example, a buyer of a 400,000 € home saves 2,000 €.

First-time buyers have not previously had to pay transfer tax at all, provided certain conditions are met. The government has proposed removing this exemption as of 1.1.2024. Until then, first-time buyers can still purchase a home without paying the tax—saving 6,000 € on a 400,000 € home.

6. How much rent are you paying now?

When is it worth buying your own apartment if you are renting?

It is an important question, even though many do not stop to consider it. A tenant should calculate what renting will cost in the long term compared to buying an apartment. Compare rental costs with monthly mortgage payments, and keep in mind that paying off a mortgage is an investment in assets, whereas renting is a continuous expense without the accumulation of wealth.

Which option is more beneficial for you?

Summary: Finding the right time

The decision of when to buy is always personal and requires careful thought. Look at your finances, life situation, and future plans. Consider which loan repayment method and possible interest protection suit you best.

If you conclude that the right time is now, here you can explore Olas’s new geothermal homes in Helsinki, Espoo, and Vantaa. Olas is a financially strong builder with the top AAA credit rating—read more here.

Good luck in your search! Let us know if we can help.

You can find available homes here.

Warm regards,
The Olas housing team