Finland’s banks refuse mortgages for renovation properties, valuing some at zero euros

A well-paid homebuyer in Turku was denied a mortgage for a 45,000 euro property after six banks assessed its collateral value as zero, a decision experts warn could accelerate the demolition of older buildings rather than their repair.

Aleksi Kankaanranta, a project manager in construction, found what he considered his dream home—a 75-square-metre half of a wooden duplex located five kilometres from Turku city centre. The asking price was 45,000 euros, and Kankaanranta applied for an equivalent mortgage from six different banks, Yle reports. All rejected his application, citing the property’s extensive renovation needs and declaring it had no collateral value.

“According to their calculations, the renovation would cost far more than the loan I was seeking,” Kankaanranta said. “They assumed a contractor would do the work, so my own estimates—planning to handle most repairs myself—didn’t matter.”

The property, situated on its own plot near services, a train station, and the city centre, required major upgrades, including a new roof, façade, electrical system, and wet-room renovations. Kankaanranta, trained as a construction engineer, had budgeted 50,000 euros for the repairs, intending to fund 30,000 euros upfront from savings. Yet banks dismissed the location’s value, including the land itself.

“Even the plot’s central location didn’t factor into their valuation,” he said. “I assumed the land alone would hold significant worth.”

Kankaanranta’s income has more than doubled since his last mortgage application in 2020, when he purchased a similarly unrestored period home. Despite his improved financial standing, the rejection marked a stark contrast to past experiences. “The difference is massive,” he said. “Now, banks won’t lend at all.”

The case reflects a broader trend: Finnish banks have tightened scrutiny of property condition before approving mortgages. Yle previously reported that lenders now demand detailed documentation, including shareholder lists for housing cooperatives, before greenlighting loans for renovation projects.

Panu Savolainen, a professor of architecture at Aalto University, criticised the reliance on flawed condition assessments, which he said often lack rigor for older buildings. “Some of these reports are just box-ticking exercises with no real substance,” he told Yle. “Banks treat them as raw data, even when they’re unreliable.”

Savolainen warned that restricted lending could fuel a wave of demolitions, as nearly 8,000 buildings were torn down in Finland last year—almost double the annual average of the past decade. For Kankaanranta, preserving the property was a matter of principle. “Old buildings have character,” he said. “Giving them new life is meaningful.”