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‘Prove you’re going to stay’: The challenges of buying a home in Denmark as a foreigner

The Local’s readers in Denmark shared their experiences of purchasing a house or apartment in the Nordic country.

'Prove you're going to stay': The challenges of buying a home in Denmark as a foreigner
Foreign house buyers in Denmark are typically asked for a higher downpayment on their mortgages. File photo: Niels Christian Vilmann/Ritzau Scanpix

With skyrocketing house prices in the last year and a half, closely linked to the Covid-19 pandemic, becoming a homeowner in Denmark hasn’t got any easier.

Foreign nationals looking to buy property can face additional challenges, including minimum residency requirements and banks asking for a higher down payment on mortgages.

We asked our readers to share their experiences. Thank you to all who took the time to get in touch.

One issue that was frequently mentioned was the higher down payment lenders ask for from foreign buyers.

“We knew as foreign buyers we had to put down 20 percent down payment in cash,” wrote Ellen, who bought a house in Aalborg with her partner in March this year. Ellen and her partner are both foreign nationals, with one holding an EU citizenship.

“The first question our real estate lawyer asked us was ‘how is your marriage?’ It is fine but this caught us very much by surprise,” she recounted.

Another reader, Paolo, reported “more down payment (sometimes up to 40 percent) and banks would request a proof that ‘we were going to stay in the country’.”

Not being a permanent resident counted against at least one reader when applying for mortgages.

“(Being refused a loan, despite provisional approval in the past) was a common thread with almost every bank we tried; they told us our personal economy was really great, but my lack of permanent residency was a risk. Of course this was never written down, but mentioned in phone calls,” wrote Drew Fremlev Fisher, who was turned down several times along with his Danish partner before eventually being accepted for a mortgage by the Lån og Spar bank.

Foreign nationals who have lived in Denmark for less than five years are required to apply for permission to buy real estate with the Ministry of Justice’s Department of Civil Affairs (Civilstyrelsen). This also applies to Danes who have lived abroad.

This affected the buying process for some of those who wrote in to us, although others described it as “additional paperwork” rather than an obstacle which would prevent buying.

READ ALSO: Danish government refuses to intervene over soaring house prices

“Getting the loan from the bank was difficult since we hadn’t lived in Denmark for five years minimum,” wrote Shweta, who purchased a house in Billund in March 2020.

“We had to go through multiple banks to get a bank loan with a good offer. We also had to get an approval from the government to buy property in Denmark. But it was handled by the real estate people and the approval arrived in a week or two,” Shweta recounted.

That approval was contingent on a condition that Shweta and her partner do not rent out their property.

“If we haven’t lived in Denmark for minimum of five years then we cannot rent out the property under any circumstances. Even if you have to move within the country, you will need to sell the property first,” she said.

Shweta told us that the mortgage taken out by and her partner has better terms than she might have expected in her home country, India.

“The total credit loan at 1 percent per annum was a great surprise and a home loan in India would be much more around 9 percent to 11 percent, I think,” she wrote.

Ellen mentioned another key difference compared to buying a home in the United States.

“In the US we have a real estate agent for both the buyer and the seller. Here in Denmark the real estate agent is only for the seller,” she wrote.

Another reader, Craig, also found that estate agents operate differently in Denmark.

“Estate agents work on a very different basis in Denmark compared to back home in South Africa where they charge a higher percentage than in Denmark but do not get a guaranteed monthly salary,” he wrote.

“The expectation of having to pay the agency fees after the agency contract has expired is also somewhat onerous, especially when the house has still not sold and the period is never-ending or you have to find a new agent and cannot self-sell,” Craig added.

“Holding an open house for only 30 minutes, with little or no warning is not what we were used to back home,” he also said.

In the later stages of the buying process, some were impressed by the efficiency of the handover once a sale had been agreed.

“It was incredibly quick to go through the purchase process once we had the money in place. About 2 weeks,” wrote Fiona Smith.

“We received an email from the sellers (the agent) saying ‘congratulations!’ before we’d actually paid the money but because we’d fulfilled all the criteria, the house was deemed to be ours,” she explained.

“We’re both British and in the UK pretty much anything could happen until you literally have the keys in your hand and contracts exchanged so that was a very pleasant surprise (and one we didn’t quite trust until we’d paid!),” Fiona said.

READ ALSO: How the cost of renting an apartment in Copenhagen compares to other cities in Denmark

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PROPERTY

What do foreigners need to know about buying a home in Denmark?

After several years of settling down in Denmark, it’s natural for foreign residents to think about buying a home. What’s worth knowing about getting on the property ladder as a non-Dane?

What do foreigners need to know about buying a home in Denmark?

For some foreign home buyers in Denmark, their first Danish home might not be the first home they have bought, and there will be a few differences in rules to take into account.

For others, Denmark might be the place where you take your first step onto the property ladder.

In either case, there are several rules and facets of the Danish housing market that are worth knowing when you set out.

I have savings, am a permanent resident in Denmark and want to buy a home. What should I do?

Unsurprisingly, the first step is to get approved for a mortgage or, in Danish kreditgodkendt.

“Then the thing to do is go down to a bank and get a købsbevis [mortgage certificate, ed.],” Mikkel Høegh, department director for real estate economics with Jyske Bank, told The Local via email.

“Here you will have a meeting at which you are pre-approved to buy a property up to a certain amount,” Høegh said.

The meeting, which takes place with an advisor from the bank, involves setting out a budget and looking at the applicant’s tax information to get an overview of their personal finances.

“Once you have been (approved) you can start house hunting,” he said.

The certificate is based on a calculation of “what amount you are in a position to buy a property for,” Lise Nytoft Bergmann, real estate economist and senior analyst with bank Nordea, told The Local.

House hunting can initially be done online, while buyers should talk with their families about how the see their future home, Bergmann advised.

“Whether it’s location that’s given highest priority, or the number of square metres, how modern a property… have these thorough conversations with the family about what you see as most important,” she said.

Are there any rules relating to buying a home that apply specifically to foreign nationals?

“There are no special rules for foreigners as such,” Høegh said.

Danish mortgages are based on the prices of the house being purchases, and buyers are approved to buy for that amount, he explained.

“The next step is then to find the property. When it’s been found, the property is what guarantees the loan. This means that the mortgage lender has a guarantee in the property. So it’s the property that is most important here,” he said.

“The buyer must pay at least 5 percent (of the price of the house) upfront,” he noted.

What if there’s a chance I might move back home (or somewhere else) in future? Should I still buy a house in Denmark?

“There some overheads which are connected to buying a house,” Bergmann said.

“They’re not entirely small, and so therefore it’s an advantage to spread these costs out over as many years as possible,” she said.

These include a registration fee which must be paid to the state of 1,750 kroner plus 0.6 percent of the purchasing price; and registration of the mortgage deed (pantebreve) of 1,730 kroner plus 1.45 percent of the purchase price.

Banks and mortgage lenders must usually also be paid for their work related to the purchase. This can include assessing the buyer for the mortgage certificate and for issuing it, valuing the property, and producing documentation as well as for consultancy. These costs can vary between financial institutions.

It may also be necessary to take advice from third parties such as lawyers, architects or electricians. The costs of actually moving, insurance and renovation must also be considered.

“We usually that you should have a timescale of a minimum of five years, and preferably longer,” Bergmann said in relation to staying in Denmark after buying a home.

What can I do to make sure I get the best mortgage offer?

“In Denmark the prices of mortgages are relatively similar and there is no difference between people and the price they are offered,” Høegh said.

“As such, what is important is finding a property that can be turned over, in other words you should keep in mind that another buyer must come after you,” he said.

“In addition to this, the price of the mortgage is related to how much of the loan is in the property. The more money you bring yourself [through the deposit, ed.], the cheaper it is to loan,” he said.

Both fixed and variable interest rate mortgages are available in Denmark, and the terms for these may stand out from what is available in other countries.

“A quite unique thing in Denmark is that you can get a fixed interest rate mortgage for 30 years. There are very few places in the world where you can do that, so when we say fixed rate we don’t just mean five or eight years,” Høegh said.

“Additionally, a mortgage in Denmark is such that the borrower can always go to market interest, so there is also nothing like a penalty interest which you see in other countries,” he said.

“Denmark has therefore an incredibly efficient mortgage system which everyone who buys a property has access to,” he said.

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