Lithuania eases mortgage down payment rules for select first-time buyers

Lithuania’s central bank has reduced the minimum required down payment for first-time homebuyers who meet certain conditions, lowering it from 15% to 10% under newly updated responsible lending rules that came into force on Saturday.

The Bank of Lithuania stressed that the reduced threshold will not apply automatically. Banks and other lenders will decide the required down payment for each borrower individually, taking into account their financial situation and the property being bought. To qualify for the 10% minimum, a buyer must not have owned residential property during the previous five years.

Bank of Lithuania Governor Gediminas Šimkus has said that first-time home loans generally carry lower credit risk than borrowing for a second or subsequent property. He has also argued that rapid increases in housing prices have made it harder for financially stable households to accumulate the previous 15% deposit.

For second and subsequent home purchases, the minimum down payment remains 30%. However, borrowers who have already repaid more than half of the balance on all their existing home loans may be eligible for a 15% down payment.

The central bank also simplified its debt-service-to-income assessment. Under the revised approach, monthly loan payments cannot exceed 50% of a borrower’s income, based on a stress-test interest rate of at least 6%. The old system combined two separate lending restrictions. According to the Bank of Lithuania, the aim is to make borrowers more resilient to possible interest-rate increases while keeping lending requirements more stable across interest-rate cycles.

Lithuania first introduced its Responsible Lending Regulations in 2011, with previous revisions in 2015 and 2021.