How to save money for mortgage initial contribution in Finland?
Some readers asked about details of buying an apartment. Today I will answer the part which covers saving money for initial contribution. If you already have money, you will not probably need to use this scheme. But if you are still saving, you can use ASP account.
Any person younger than 40 can make such an account. This a type of saving account which you can open in any bank. The state guarantees that this account income will be at least 1% a year. In fact, nowadays banks give 4 more percents. But I understood that this is their good will and the situation might change in next years.
Using ASP account, you need to save for at least 8 quarters. If in some of the quarters you do not top up the account, this quarter does not count. The minimum quarter contribution is €150, maximum is €3000. These €150 can be put onto the account in parts, the main idea is that quarter sum is at least €150. You also do not need to cover the whole quarter. If you start saving on 31 March and immediately put €150 onto the account, the first quarter is done. Also, if you put €150 on the first day of the last quarter, it's also counted. This way, started to save at the end of the quarter, you can use the money in 1 year 6 months and 2 days. You can save as long as you wish. However, the percentage is given for the first 5 years only. So, saving longer is not beneficial.
The biggest advantage of the ASP account is that the state plays as a following loan guarantor for the bank, and as an insurance for the loan holder in case of rate growth. Nowadays, the loan interest is very low, but when it grows over 4,7% (not sure about exact numbers), the difference will be paid by the state. However, this kind of insurance covers only limited amount (about €150000, the limit is different for different areas) and is limited by 10 years.
Because of this amount and time limits, in fact, people get 2 loans — one under ASP system and a usual one. For the ASP loan, you need to collect at least 10% of the buying as an initial contribution. The requirements for the second loan are not regulated by the state, but usually, banks provide the same as for the first loan. If you have extra money, they can play as an initial contribution for the second loan.
It is not written anywhere, but the practice shows that when getting a loan under ASP system, banks give more money and offer better rates. Maybe the people who managed to follow the ASP procedure seem more reliable loan holders.
If you change your mind about buying, you can cancel ASP account anytime and get your money back. But not all the banks give the earned interest. Anyway, if in 1,5-2 years you might buy an apartment, getting an ASP account seems to be a good idea.