Kredex to guarantee loans for large families, rural properties

Mustamäe apartment buildings.
Mustamäe apartment buildings. Source: Ken Mürk/ERR

Loans for large families and properties in rural areas will be guaranteed by state foundation Kredex in the future according to new regulations from the Ministry of Finance.

Under the new rules, the downpayment needed for a property will be reduced from 10 percent to 5 percent for families with three or more children.

The target group is families with an income of between €1,600-€2,200 a month who currently live in rented accommodation. This is estimated to be approximately 1,200 households.

The ministry said, for these families, renting an apartment is more expensive than a monthly mortgage repayment. This makes it harder for them to save up a downpayment. Lowing the threshold will cut the time needed to save.

This problem is greatest in Tallinn, Tartu and Pärnu.

The ministry said completely scrapping a downpayment requirement is not reasonable as it is not in line with the principle of responsible lending. The bank must be sure customers can cope with unexpected changes.

In total, there are 19,000 households with three or more children in Estonia and 3,160 of them rent properties.

The new rules will also define a young family as one where at least one parent is under 35 raising at least one child under 16. Or a parent up to 40 years old raising two children under 16.

Kredex to guarantee loans to land buyers

Under the new rules, KredEx will secure loans for buyers in rural areas. This includes areas outside of Harju County, Tartu County and the city of Pärnu, except in certain areas with a low market value

Additionally, the rules exclude Sauga, Paikuse, Viljandi, Rapla, Kohila, Rakvere, Kuressaare and Haapsalu.

The new guarantee is primarily aimed at apartment buildings, apartments and private houses located in smaller cities, towns and cities.

The loan guarantee limit for the target group is €80,000.

Last year, approximately 15,000 loans were issued in Estonia, one-fifth of which were guaranteed by Kredex. 


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Editor: Helen Wright

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