Swedbank drops family benefits as income on home loan applications
Unlike other banks in Estonia, Swedbank will no longer count family benefits, including child benefits, as income when evaluating home loan applications.
Starting last month, Swedbank counts wages — not benefits — as the applicant's primary income when approving home loans, mortgage area manager Anne Pärgma confirmed according to daily Õhtuleht (link in Estonian).
Other banks in Estonia, including SEB, Coop Pank, LHV, Luminor, Citadele and Bigbank, continue to count family benefits in applicants' income.
LHV private financing chief Catlin Vatsel noted that the number of children still affects a family's borrowing capacity, since more dependents mean higher monthly expenses and a smaller portion of income available to service loans.
Karin Ossipova, head of mortgage lending at Coop Pank, added that families with at least three children can utilize the housing loan guarantee for large families offered by the Estonian Business and Innovation Agency (EIS), which reduces the usual required down payment required for home loans to 5 percent.
Jaak Tõrs, head of the Financial Stability Department at the Bank of Estonia, said loan decisions and conditions are based on a bank's risk assessment regarding whether the individual applying can repay the loan.
The central bank's housing loan guidelines emphasize assessing income regularity. While considering income types is up to each bank's risk evaluation, it's important to assess repayment capacity. In other words, the Bank of Estonia does not prohibit counting child benefits as part of a family's household income.
Read more about it at Õhtuleht.
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Editor: Karin Koppel, Aili Vahtla
