Guide to home loans

If you are staying in Denmark for an extended period, you may want to buy a home. But how does home financing work in Denmark? And how can you make sure that you get the best possible loans? Find help in this guide or contact us. 

  • 1. Loans for owner-occupied homes  

    1. Loans for owner-occupied homes  

    When you buy a home in Denmark, the purchase is usually financed by a mortgage loan, in some cases supplemented by a bank loan. The process starts at your bank, which collaborates with a mortgage credit institution.

    As a general rule, you can borrow most of the money – up to 80% of the value of the property – in the form of a mortgage loan. A mortgage loan is a bond loan secured on the property, and it therefore has a low interest rate. There are several types of mortgage loans, with various advantages and disadvantages. There are, for example, both fixed-rate loans and variable-rate loans. The loan best suited for you depends on both your financial situation and your personal preferences.

    If you want to borrow more than 80% of the value of the property, a bank loan will be a good idea. A bank loan is somewhat more expensive than a mortgage loan, so you may want to pay as large a down payment as possible. Danish rules require a minimum down payment of 5% of the purchase price, but the bank will often demand a higher down payment (of up to 30%) depending on your finances.

    About mortgage loans
    When you take out a mortgage loan, the mortgage credit institution funds the loan by issuing bonds. Mortgage bonds are securities, and their price may fluctuate, just like share prices. The bonds are purchased by investors, and they earn the interest and instalments you pay. The mortgage credit institution earns its money on the so-called ‘administration margin’ which you also pay.

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    - or call us on +45 70 25 11 22 if you have any questions about home loans

  • 2. Loan for co-operative housing 

    2. Loan for co-operative housing 

    A co-operative housing unit is a special type of housing, which is fairly widespread in large Danish towns and cities. Co-operative housing units are typically flats or terraced houses. The residents own the property jointly, and when you purchase a unit, you acquire an exclusive right of use to a unit as well as a share of the assets and liabilities of the co-operative housing society. 

    If you buy a co-operative housing unit, you cannot take out a mortgage loan in the same way as you would for a normal owner-occupied home. Instead, you can take out a special co-operative housing loan with your bank, secured on the unit. The loan therefore has a lower interest rate than a consumer loan. When you buy a co-operative housing unit, you must pay a down payment. The size of the down payment depends on your financial situation, but under Danish rules, the down payment must amount to at least 5% of the purchase price.

    In large Danish towns and cities, co-operative housing units are a popular type of housing, and it can be difficult to find one. Note that the finances of a co-operative housing society are not always transparent, and you should always seek advice from a lawyer/buyer adviser before buying a co-operative housing unit.

    Read more about co-operative housing loans

  • 3. Fixed or variable rate of interest

    3. Fixed or variable rate of interest

    There are two major advantages of fixed-rate mortgage loans. First of all, you know the interest payable throughout the term of the loan, which gives you peace of mind regarding your home finance. Secondly, you can reduce the outstanding debt at a later time if interest rates rise and you convert your existing loan to another fixed-rate mortgage loan with a higher interest rate. 

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    But having the security of a fixed-rate loan means that payments on the loan are higher than if you choose a variable-rate loan at the same time. This is because the interest rate on a fixed-interest loan is always higher than the rate on a loan with a variable interest rate.

    If you choose a variable-rate loan, payments on the loan are initially lower. On the other hand, there is the risk that the interest rate will later rise, which will result in a corresponding increase in payments. Conversely, the interest rate may fall, which will make payments even lower.
    What is the right choice for you depends on both your financial situation and your personal preferences.

    Please feel free to contact us for a discussion of the advantages and disadvantages for you.

    Book a meeting

    - or call us on +45 70 25 11 22 if you have any questions about home loans