Is it a Problem if a Housing Cooperative has Debt?

One of the biggest surprises for many foreigners in Finland is that when you buy an apartment, you’re not just buying your four walls. You’re also buying into a housing cooperative (taloyhtiö) that owns and runs the whole building. And yes, that cooperative can (and usually does) have debt.

So is that bad news? Not always. Let me explain.

Why cooperatives have debt

Housing cooperatives usually borrow money for big renovations — things like renewing or fixing the pipe, facade repairs, new roofs, or even energy efficiency upgrades. Instead of asking every owner to pay their full share upfront (which could mean tens of thousands at once), the cooperative takes out a loan and spreads the cost over time.

That’s actually a pretty smart system — if managed well.

When debt is not a problem

Debt itself isn’t automatically dangerous. In fact, it is a good sign in the sense that the building is being taken care of and renovations are being done. If you run into a building from the 1960’s that has no debt you need to be careful, because it should have had major renovations in the past years and therefore should have debt. If it hasn’t, the building has probably not been taken care of.

Things to keep in mind:

• If the renovation was necessary (like pipes in a building older than 1980) and adds value, debt is justified. It’s even a necessity.

• If the cooperative plans renovations in time.

• If the loan amount compared to the building’s total value is reasonable.

In those cases, debt is simply part of maintaining your future home.

When debt can become a problem

But sometimes the numbers tell a different story. Be careful if you see:

• The cooperative doesn’t get a loan from the banks, i.e. it can be difficult to get necessary renovations done in time

• The cooperative loan’s interest margin is pretty high (clearly above 1%). This can indicate there is a major owner in the cooperative and that’s why banks see risk on giving loans to the cooperative
• Poor financial planning from the board (or no plan for upcoming renovations).

• Big renovations still coming, meaning more loans on top of the existing ones.

What you should always check

Before you make an offer, look carefully at the cooperative’s documents. At minimum, check:

• Are the finances of the cooperative in order, i.e. are the charges (= cooperative’s income) sufficient to cover its costs?
• Does the cooperative have a buffer or not (rule of thumb = buffer should cover 3 months of costs)
• What big renovations are coming up? Don’t trust the cooperative’s 5 year plan, but check yourself which renovation is close (it’s easy if you read my renovations blog post or my Renovation Calculator).
• The terms of the loans — interest rate, repayment schedule.

If this feels overwhelming, don’t worry. With the right help, it’s actually pretty simple to understand. And believe me, it’s worth it.

My take

So — is it a problem if the cooperative has debt? Not automatically. Debt is normal here. What matters is how the cooperative is managed and whether it will be able to get debt when needed.

Remember: you’re not just buying an apartment in Finland. You’re buying into a cooperative. And its financial health is just as important as how nice the kitchen looks.