Kodulaen

Kodulaen is a type of mortgage loan used to finance the purchase or construction of a dwelling in Estonia. It is typically provided by banks and other regulated lenders and is secured by a mortgage on the property.

Key features: The loan is repaid in installments over a long term, commonly 15 to 30 years. Interest rates may be fixed for an initial period or tied to a reference rate. The loan-to-value ratio (LTV) often reaches 80–90 percent, depending on borrower and property type. A down payment from own funds is usually required.

Process: Applicants may receive pre-approval based on income and credit history, then submit a formal application with documents, have the property appraised, and obtain a mortgage offer. After agreement, a notary deed and mortgage registration in the land register are completed, and funds are disbursed to the seller or developer.

Costs and obligations: In addition to interest and principal, borrowers may pay valuation, notary, and registration fees. Some loans require insurance such as property or mortgage life insurance. Borrowers must keep up repayments, and may face penalties for early repayment or for missing payments.

Risks and considerations: Changes in interest rates affect payments, especially for variable-rate loans. Property values can influence loan terms and equity, and there is a risk of negative equity if prices fall. Lenders assess affordability through debt-service ratios to determine suitability for the loan.