How Estonian Youth Save Money for Their First Home Purchase

Buying a home is an important step for every young person that requires thorough preparation and planning. As real estate prices have continued to rise, the amounts of home loans and the required down payment percentages have also increased. How do young people accumulate the necessary funds to buy their first home?

With rising real estate prices, housing loan amounts have also grown. For example, in 2020, the average home loan taken from Swedbank was 91,000 euros and the average required down payment was 34,000 euros. Last year, however, the average loan amount was already 133,000 euros and 43,000 euros was accumulated for the down payment. 

"Last year, young people, meaning borrowers up to 30 years old, accounted for 24% of all our home loans, and the average loan amounts for young people also increased. In the 22–25 age group, the average loan amount grew by 16% and reached 107,000 euros. In the 26–30 age group, the growth was 8% and the average loan amount reached 133,000 euros," said Anne Pärgma, head of Swedbank's housing loan department.

Down payment comes from multiple sources

Although with KredEx guarantee the down payment can be as little as 10% of the home purchase price, high real estate prices still mean accumulating a significant sum. According to Swedbank's statistics, last year the average down payment for home loans with KredEx guarantee was 17,000 euros.

"Young people are very interested in buying their own homes and accumulating a down payment is one of the first major tests of financial discipline," said Pärgma. A recent Swedbank survey found that 63% of young people accumulate down payments through savings, 29% prefer to accumulate through investing, 26% rely on financial help from family, and 19% accumulate down payments in some other way. Notably, younger borrowers more often rely on family help, while older young people combine different accumulation methods.

Last year KredEx guaranteed nearly 1,500 home purchases

When purchasing their first home, young people can turn to KredEx guarantee, which can be used by, for example, young families, buyers of energy-efficient properties, and specialists up to 35 years old. In 2024, 1,460 guarantee agreements were concluded in the young specialist target group and the average guaranteed loan amount was 124,106 euros.

"The share of the young specialist target group has been larger than other groups for years. Usually they also have better creditworthiness, which makes accumulating a down payment easier," explained Kristo Hütt, client manager of the housing and energy efficiency department at EIS. "Other target groups often need family help or use assets that have been inherited, for example."

It should be noted that KredEx guarantee is not a subsidy, but a state guarantee with a maximum size of 24% of the collateral value, but not more than 20,000 euros. A one-time fee of 3% of the guaranteed amount must be paid for the guarantee.

According to Pärgma, every young person could use KredEx guarantee, but should keep in mind that the loan would be affordable in the long term. "To get a home loan, in addition to a down payment, you need a stable income, a good credit history, and suitable collateral," she reminded, and added that the down payment requirement has been created to protect both the borrower and the lender – it shows that the borrower's financial discipline is sufficient and they can manage the financial obligations that come with the loan without worry.