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Summer houses in Denmark: What are the rules and when can you live in them?

Many people in Denmark spend their holidays living in summer houses, but what are the rules for staying at the properties around the calendar?

Summer houses in Denmark: What are the rules and when can you live in them?
Housing in municipal summer house zones cannot generally be lived in year-round. File photo: Henning Bagger/Ritzau Scanpix

Summer houses are properties in which residence is not usually permitted year-round. Rules preventing permanent use are in place to ensure summer house areas remain recreational in nature; to limit new construction in valuable and uninhabited coastal areas; and to protect natural landscapes from wear and tear.

Owners of homes which are not summerhouses (helårsboliger) are generally required to ensure that their properties are lived in for at least 180 days per year, either by themselves or by tenants. This is known in Danish as a bopælspligt, literally “obliged residence”. Although it’s not actually mentioned in Danish law it is practiced due to tax rules.

Local authorities decide through zoning laws (lokalplaner in Danish) which housing within their municipal limits are required to comply with bopælspligt rules.

The purpose of these rules is, in part, to prevent unhindered property speculation.

Summer houses are not generally built with full-time residence in mind. As such, they are less isolated and not as well heated as regular housing. That means energy bills will be higher for the time they are used, especially if this is not during the summer.

When am I allowed to live in a summer house?

As well as being required to live in your regular house for at least 180 days of the year due to the bopælspligt, local authorities do not generally permit residence in summer houses in the winter months, meaning from November 1st-March 1st.

This does not mean that summer houses may not be used at all during the winter, but longer stays are not allowed.

Are there any exemptions?

Some circumstances provide exemptions that allow summer houses to be used as permanent residences. There are three main categories.

These are: 1) the summer house was legally permitted to be used as a permanent residence when the area in which it was located was made a summer house area under a zoning plan, and the right to permanent use has not yet lapsed. 2) The local municipality has given the summer house owner special permission, 3) The owner is retired and has owned the summer house for at least a year.

Special permission can also be given by municipalities in a range of circumstances, including owners or leaseholders at essential local businesses like supermarkets who need to live nearby; or people who find that living in summer houses can ease serious or long term health conditions. Applications for special permission (dispensation) are made with the relevant municipality.

When retired people are given permission to live in summer houses, their close families can live with them and may also continue to do so if the person with the special dispensation passes away. Once the family moves, the special dispensation lapses.

It should also be noted that the summer house must be in reasonable condition for the local authority to permit permanent use. A house in very bad condition can be declared unfit for year-round residence (helårsbeboelse) by the authority. A surveyor’s report is often advisable for people who are considering moving permanently into their summer house.

Sources: Borger.dk, Aarhus Kommune

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EXPLAINED: How to restructure and reduce your mortgage in Denmark

Denmark's unique borrowing system has enabled thousands of people to restructure their mortgages this year, cashing in on high interest rates which have caused a drop in market value of covered bonds. We explain how it all works and how you can potentially pay off a sum of your mortgage.

EXPLAINED: How to restructure and reduce your mortgage in Denmark

How does the mortgage system work in Denmark?

Denmark has a unique mortgage model, which is regarded as one of the best in the world.

When you take out a loan to buy a house in Denmark, the bank finances the loan through a covered bond [Danish:realkreditobligation,ed.] What makes the model unique is that you as the borrower know exactly what covered bond is issued to finance the loan.

“This direct link is very special to Denmark,”  Peter Jayaswal, executive director at Finans Danmark told The Local.

“You can follow what the market price is for the bond that is funding your loan in the capital market. A German borrower for example has a mortgage by the German bank issuing a loan using a covered bond. But there is no link, so the homeowner doesn’t know what the bond is.

“In Denmark, you can see it exactly. You can go onto your bank website everyday and follow the market price. That means that we have this early repayment system where I as a borrower am allowed to prepay my loan by buying back at market price the bond that has funded my loan,” Jayaswal explained.

When interest rates are increasing, it means that the price on the bonds is decreasing and this is why thousands of homeowners in Denmark have bought out their bonds this year, at a low market value and paid off a portion of their mortgage. 

READ ALSO: Interest rates encourage Danes to restructure mortgages

So how can I make this early repayment on my mortgage?

The first thing to do is to set up a meeting with your bank so they can assess whether you will benefit from the drop in bond value.

The market price of covered bonds is well documented in Danish media but you can also follow them on your bank’s website or by asking for an appointment with your bank to assess your current mortgage.

“You may at some point in the past have taken out a mortgage of 1 million kroner with a one percent fixed interest rate. To keep it simple, let’s say the loan is without amortisation.  When you took out this mortgage, the bond was issued at 99 kroner meaning that the nominal debt will be around 1,010,100 kroner to give a 1 million kroner revenue.

“Today you can see the interest rates have increased and the price on the bond financing your loan is say 80 kroner. As a borrower you can buy the bond in the market at market price and prepay the mortgage loan. But you only need to take out a new loan of around 808,000 kroner to do this.

“So you can take a new loan out at 808,000 kroner and use this to repay your existing loan and reduce your debt by around 200,000 kroner. This transaction can be done simultaneously by your bank, so you won’t end up with two loans,” Jayaswal told The Local.

What about interest rates on my mortgage?

The interest rate you get for your mortgage can be fixed or variable and they mirror the prices investors pay for the bonds. 

Fixed rate mortgage

Today, the fixed interest rate is five percent. This means that if you decide to buy your bond at the lower market value, you will have to take out a new loan at a higher interest rate.

“Using the example of reducing your mortgage by 200,000 kroner by buying the bond at a low market value, every month you are now paying an interest rate of five percent fixed term, rather than your one percent you had before. So you are paying more each month for the benefit of paying off a portion of your mortgage early and the benefits will decrease over time. 

“You usually break even after around ten to fourteen years but the bank will calculate this for you,” Jayaswal said.

“If you know you’re moving in two to three years, it makes sense to get a new loan with a higher interest rate because you’ll have to repay the loan anyway when you move. But if you think you’ll be in your home a long time, keeping this loan, then you need the interest rate to decrease in ten to fourteen years.

“And that’s the problem because we must be frank and say we can do all the forecasts but in the end no one knows what future interest rates will be, so it has to be the decision of the borrower,” Jayaswal explained.

Variable rate mortgage 

The other option is to take out a variable interest rate mortgage to buy the bond, which today is around three percent. However this carries a risk, as the interest rates are adjusted on a regular basis. F3 loans, for example, are adjusted every three years, while F5 loans have adjustments every five years.

“Changing from a fixed to variable interest rate, to reduce your debt and avoid an increase in interest rate, comes with a risk that you don’t have a fixed rate for 30 years, so you are more exposed and that’s very important be aware of,” Jayaswal told The Local.

On Monday, the company Totalkredit, the largest provider of real estate loans for private homes, auctioned flexible loans with resulting interest rates exceeding 3 percent on the F1, F3 and F5 loan types. That means the interest on these types of mortgages will be at their highest for several years.

According to Finans Danmark, Danish home owners have repaid 337 billion kroner of their mortgages in the first three quarters of 2022. Many of these home owners have chosen to switch to variable interest rates. You can swap back to a fixed-rate mortgage at any time but you also have to be aware that these rates may have increased by then too. 

How do I decide which option to take?

“I always say to people, feel free to go to your bank, ask them to make the calculations for you, so you have the foundation to make a decision”, Jayaswal says.

“Some might think a 30-year mortgage at a fixed rate of one percent is great, especially because today interest rate is five percent. Others won’t mind paying a five percent interest rate for a few years, because they want to reduce their debt today and believe interest rates will decrease. It is up to the borrower to decide.

“It’s not that one option is better than the other, it’s that you have opportunities and this is unique in Denmark,” Jayaswal said.

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