Lithuania lowers first-time homebuyer down payment to 10%, tightens rules for subsequent loans

Lithuania's central bank, Lietuvos bankas (LB), has implemented updated responsible lending regulations aimed at balancing accessibility for first-time homebuyers with financial system stability. The new rules, effective August 1, introduce a lower minimum down payment for individuals purchasing their first home.

Under the revised regulations, the minimum down payment for first-time homebuyers will decrease from 15% to 10% of the property value. This change applies to individuals entering into their first credit agreement for residential property acquisition or construction, provided they or any co-borrower do not own or have not owned property in the past five years. However, the LB emphasizes that a 10% down payment is not guaranteed, as lending institutions will still assess each client's financial situation individually.

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With these changes, we are creating more opportunities for residents purchasing their first home, while at the same time maintaining responsible lending principles. A lower down payment is intended to help first-time homebuyers who do not own other real estate enter the market, and stricter requirements for additional housing loans will help limit excessive indebtedness and strengthen the financial system's resilience.

For individuals seeking a second or subsequent mortgage, the minimum down payment requirement remains at 30%. An exception allowing a reduction to 15% will now only be applicable if the borrower has repaid more than half of the principal amount of each existing mortgage. This change is intended to limit excessive debt and strengthen the financial system's resilience.

Additionally, the assessment of the loan installment-to-income ratio has been modified. Instead of a combined two-limit approach, a single requirement will be applied: the loan installment cannot exceed 50% of income. This adjustment aims to better prepare borrowers for potential interest rate increases and ensure a more consistent impact across the interest rate cycle. These responsible lending regulations have been in place in Lithuania since 2011.

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Taking into account the specific financial situation of the client and the property being purchased, the decision on the size of the down payment will be made by the lending institution in each case.