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Home construction loan

Loan for construction and renovation

Build and renovate flexibly

We can customise our home construction loan to your needs. You can apply for the loan for building or renovating a house, flat, holiday home or buy-to-let home.

Pay only interest on the loan during construction

You can have a repayment holiday during construction: you pay only interest on the loan and start repayments when the building is completed.

OP bonuses on your loans

If you are an OP cooperative bank's owner-customer, loans generate OP bonuses to you. For example, for home loan borrowers, the OP bonus benefit is often sizeable – up to hundreds of euros a year – and bonuses can be used for the payment of insurance premiums, among other things.

Are you not a customer at OP?

Apply for home construction loan without OP's credentials via the link below.

Cost calculator helps you to get an idea of your construction costs

It pays to begin preparing for a construction project, whether for building a single-family home or renovating a holiday home, by outlining a rough estimate of the construction costs.

An instant cost calculator helps you to get an idea of your construction costs. The calculator asks you to provide information on the building, such as the name of the town/city, the size of the building, the heating and ventilation solutions, and the proportion of the construction work that you will order from a professional.

Instant cost calculator helps you to get an idea of your construction costs.

Go to calculator*

(*Rakentaja.fi)

How can I obtain a home construction loan?

First get a cost estimate on the construction work from a professional and then send a loan application online. Contact us for financing as soon as your start planning so that our experts can tailor a home construction loan that suits your needs. At the same time, we will agree on the repayment method, and check that your insurance cover during construction is in order. 

Home construction loan is not restricted to building a home for yourself. You can also apply for the loan for building and renovating a holiday home or a buy-to-let home. You can also apply for the loan for buying a plot, provided that construction work on the plot will begin within a certain time limit.

Applying for a home construction loan

  1. Home construction loan application online
  2. Loan offer
  3. Loan negotiation over the phone or online on the banking day following the loan offer or at a later date specified by you
  4. If you are an OP customer, you can handle the loan negotiations and signatures entirely online. Otherwise, we will ask you to visit an OP branch office for finalising the loan negotiations and signatures.

You can fill in the loan application online even if you are not yet our customer. When you fill in the loan application, you do not yet need to know the exact price of the new home or other such details. The loan application is nothing more than an invitation to make an offer ‒ it does not bind you to draw down the loan.

In the loan application, we will ask you the following information:

  • your income, expenses and debts and their monthly charges, and those of other loan applicants, if any
  • information on your wealth.

After you have sent your application, we will contact you the following day.

Sufficient repayment capacity is required for granting the loan. We will check your credit history from the credit information register of Suomen Asiakastieto Oy when you apply for the loan.

Collateral

The collateral for a loan for building a detached house is usually the property being built, or the lease on the plot and the detached house located on the plot.

Although the collateral value of the property being built increases as the construction work progresses, you will initially usually need other collateral too, such as your current owner-occupied home, investment assets or other assets. You can apply for the bank's loan guarantee or a government guarantee as side collateral.

You can apply for OP’s credit guarantee to be used as side collateral for your home loan. The maximum amount of the credit guarantee is 25,000 per applicant. Alternatively, you can apply for a government guarantee to be used as side collateral.

Renovations include construction, improvement and renewal that modify e.g. foundations or bearing structures, roof, heating or ventilation systems, water systems or drain pipe fittings, the property's electric system or the purpose of use of premises (such as transforming a walk-in closet into a sauna).

Home improvement includes painting, wallpapering and renewing home appliances and fittings such as a fridge, toilet furniture or kitchen cabinets.

Need a loan for renovation and home improvement?

First apply for a home loan for renovation (for your home, holiday home or buy-to-let home). After you have sent your loan application, we'll contact you and you can then also apply for a home improvement loan.

The act governing the loan-to-value ratio came into force on 1 July 2016. The ratio applies to loans granted for the purchase or renovation of a home for which the home is lodged as collateral. The purpose of use of the home is of no significance, i.e. the law applies not only to loans taken out to buy one's own permanent home but also to those taken out to by a buy-to-let home and a holiday home.

The loan-to-value, or LTV, ratio means the ratio of the loan to the current value of the collateral lodged as security for the loan at the time of its granting. In calculating the LTV ratio, all real security placed by the debtor or another person, such as homes, deposits and securities, can be taken into account as collateral. A personal guarantee, for instance, cannot be taken into account.

The LTV ratio is a macroprudential instrument that helps the authorities to curb excessive household leverage and to prevent an increase in home prices and mortgage lending considered excessive, or other risks threatening the stability of the entire financial system.

In a normal situation, a loan may account for a maximum of 90% of the collateral's current value. For a home loan taken out by a first-time home buyer, the maximum is 95%. The Financial Supervisory Authority may reduce above maximums by no more than 10 percentage points to limit an exceptional increase in risks to financial stability. As of 1 July 2018, the Financial Supervisory Authority has decided to tighten the LTV ratio for loans granted for other than first-home purchases by five percentage points from the normal 90% to 85%. The LTV for loans granted for the purchase of a first home was maintained at the normal level at 95%.

For example, if a home buyer secures his/her home loan only with the home to be bought, he/she must now have saved at least 15% (5% for first-time home buyers) of the purchase price. It is possible to reduce the need for personal savings by providing other real security in addition to the home.
 
Nevertheless, the LTV ratio is based on the law and thus binding on banks – it can be exceeded only in cases specifically permitted by the Financial Supervisory Authority, such as temporarily in situations where homes are exchanged. In addition to the LTV ratio, the bank’s own collateral requirements may affect the amount of collateral needed for the loan.
 
Example of calculating the LTV ratio: The home sales price is 100,000 euros. The home buyer's self-financed amount is 20,000 euros. He/she needs a home loan worth 80,000 euros. In this case, the LTV ratio is 80% (80,000/100,000 *100), which is compatible with the law.
 
As the bank normally accepts 70% of the home’s current value as collateral, the collateral shortfall after pledging the home is 10,000 euros (80,000-70/100* 100,000), which usually has to be covered with additional collateral. OP’s loan guarantee, for example, could be used as additional collateral in this case.

Loan costs consist of the reference interest rate, the bank's markup and service fees related to loan repayment. In addition, the loan is subject to a processing charge when it is drawn down.

A portion of your home loan interest is tax-deductible, which reduces the amount of taxes you pay.

When you think of the amount of loan you wish to raise, you should reckon with not only the purchase price but also any other costs that you may incur, such as moving costs and transfer tax related to home buying. For instance, home buying is usually subject to such a tax (2% of the purchase price on shares in a housing cooperative and 4% of real properties).

We agree with you on a suitable monthly instalment and repayment method for your loan. The recommended maximum loan term is 20 years. The monthly loan repayment instalment should account for a maximum of 35% of your monthly net income and your repayment capacity should also tolerate a rise in interest rates. It is advisable to determine the size of your monthly instalment in such a way that you can also save some money for your future needs. If needed, you can also have a repayment holiday during which you will pay only interest on your loan.

The total home loan interest rate is made up of the reference interest rate and the bank's markup on the loan (margin). If you choose, say, the 12-month Euribor as the reference rate for your home loan, you will always know your total loan interest rate for the next 12 months.

OP-prime is another option for your loan's reference rate, the changes of which we announce to our borrowers at least 14 days before the change takes effect.

The most common loan repayment methods are equal payments and variable annuities.

Securing loan repayment

Anything unexpected can happen during a long loan term. Loan payment protection insurance is the most important insurance for home loan borrowers.  You can take it out for both a new or an existing loan – as individual cover or joint cover together with your co-borrower.

The insurance helps you cope with paying monthly loan repayment instalments if your fall ill or lose your job. The insurance pays off the outstanding loan if the insured person dies.

Owner-customer benefits

  • As an owner-customer, you get 45% off on a current account, OP eServices and OP-Visa card. For owner-customers, the cost is €2.95/month (normal charge €5.45/month). If you are under 26 years of age, you receive our daily banking services free of charge.
  • As our owner-customer, you can choose a long-term fixed interest rate for your new home loan throughout the loan's term, up to 25 years. This is how you can ensure that your interest charges for your home loan will remain unchanged throughout the loan term.

OP bonuses

As an owner-customer, you will earn OP bonuses for example from:

  • loans
  • savings and investments
  • funds in accounts
  • purchases you have paid for with OP-Visa credit
  • insurance premiums for home, family and motor vehicle policies

OP bonuses are used for the bank’s service charges and insurance premiums.

Make sure you are properly insured before construction begins. For a house kit, a turn-key house delivery, or a DYI solution, you should immediately take out a home insurance policy that includes general liability and legal expenses insurance. If you hire a construction firm to build your home, make sure they have valid liability insurance coverage.
Take a look at the terms and conditions governing loans, pledges and guarantees, and forms. You will accept the terms and conditions of the loan and collateral agreement at the time of signature.
The loan is granted by the OP cooperative bank.