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The Secret Formula: Calculating the Cost of a Mortgage Loan in Estonia That They Keep Hidden from You!

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The Secret Formula: Calculating the Cost of a Mortgage Loan in Estonia That They Keep Hidden from You!

Buying property is always a significant step, especially when it comes to investing in real estate using mortgage financing. In Estonia, like in many European countries, a mortgage is a popular way to acquire housing. But how much does a client actually overpay when buying an apartment for 200,000 euros over 20 years?

Basics of Mortgages in Estonia

Before delving into the calculations, it is worth clarifying what a mortgage loan is. A mortgage is a long-term loan secured by real estate, provided by a bank or another financial institution. In Estonia, mortgage conditions can vary significantly from bank to bank, but there are common requirements and parameters.

Usually, mortgage rates range from 2% to 4% per annum. It should be noted that the interest rate can be fixed for a certain period (for example, 5-10 years) or variable - changing over time throughout the loan term.

Calculation of Overpayment

So, let's say you take out a loan of 200,000 euros at an average interest rate of 3% per annum for 20 years (240 months). To find out the total amount of overpayment for using the loan funds, the following calculations need to be made.

The monthly annuity payment can be calculated using the formula:

[P = S * \frac{r(1 + r)^n}{(1 + r)^n -1},]


  • (P) - monthly payment
  • (S) - loan amount
  • (r) - monthly interest rate (annual rate / 12)
  • (n) - total number of payments (loan term in months)

Assuming an annual rate of 3%, we get a monthly rate (r = \frac{3}{100} / 12 \approx 0.0025).

By substituting the values into the formula, we find the monthly annuity payment (P).

Next, we can calculate the total amount of payments for the entire period:

  • [Total amount = P * n.]

And determine the amount of overpayment:

  • [Overpayment = Total amount - S.]

By conducting these calculations, the client can understand how much they are overpaying the bank for using the loan funds.

Additional Expenses

It is important to remember about additional costs when arranging a mortgage. In Estonia, when concluding a mortgage loan agreement, various fees and payments will need to be paid: a commission for opening a credit line (usually around 1% of the loan amount), the appraisal value of the property, a commission for registering the mortgage, and there may also be a fee for early repayment.

Comparing Bank Offers

It should be noted that different banks offer different conditions for mortgage loans. Before making a decision on a loan, it is advisable to analyze offers from several financial institutions. Often, not only official bank websites are useful for initial familiarization with services, but also consultations with specialists to clarify all possible "pitfalls" and select individually favorable conditions.


As we can see, purchasing housing in Estonia through a bank loan involves significant overpayment. And this overpayment depends on a variety of factors: the interest rate on the loan, the initial down payment, the possibility of early repayments without penalties, and other contract conditions. It is important to carefully calculate all economic aspects before making a decision on a mortgage loan to minimize associated financial risks.

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