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Danish Mortgages

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Oct 8, 2023

Danish Mortgages

Are you looking to get a mortgage in Denmark? Thanks to its tempting deals, mortgage income tax deduction, and low-interest rates, the Danish market has grown, making it a popular overseas destination for UK residents. But before you pick up your keys, it’s best that you know everything there is to know about the Danish market.

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Who will be eligible to get a mortgage loan in Denmark?

Unlike in other countries, people wishing for a mortgage in Denmark get as much chance as the Danish nationals. To be eligible, you’ll need to meet the following criteria:

EU/EEA citizen

If you’re an EU/ EEA citizen, you must have a business in Denmark or have been living there for five or more years and prove that your reason for living there is for business or a genuine interest in residency.

Non-EU/EEA citizen

As a Non-EU/ EEA citizen, you must apply for a Danish mortgage through the DMoJ (Danish Ministry of Justice).

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How do you get a Danish mortgage?

When getting loans for your mortgage, you can borrow up to 80% of the purchase price from Danish banks. However, this can be difficult for first-time buyers as the Danish mortgage credit institute holds authority over your mortgaged property until you’ve paid back the loan.

Usually, a deposit will be 5%, at an absolute minimum, from the remaining 20%, and once that’s been paid, you can borrow the rest through a bank loan.

Usually, with these bank loans, the repayment terms are shorter, and the borrowers will receive a higher interest rate. The loans are usually around 4-6%, which isn’t too high, but it doesn’t compare to the lower real credit loan rates.

If you’re a foreigner seeking a mortgage in Denmark and have been there less than five years, you may be asked to pay more to the banks.

Generally speaking, there are three ways to obtain a mortgage in Denmark:

  1. Fixed-rate loans – You can get the loan fixed at a certain price for the next thirty years, which means you’ll still be paying the same percentage in your first year and thirtieth year. The amount cannot change, and will not change, no matter what.
  2. Valuable interest rate loans – Instead of having a fixed rate for years to come, you have a fixed rate for fewer years. For example, you may choose that you only need a three-year loan.As the lender doesn’t have as much risk with someone borrowing for three years (compared to thirty), you’ll typically find that much better deals are offered.
  3. A combination of the two – Finally, you could choose to mix the two. This option means some of your mortgages will be on a fixed-rate loan, and the other half will be a valuable interest loan. With this option, you can still have a low-interest rate and high security.This option is great for borrowers that haven’t got a number in their head for how long they think they’ll be living in their new place.
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What are the risks in the Danish mortgage market?

The most significant risk when buying mortgages abroad is the lack of knowledge. Ignorance can cause numerous issues regarding local laws, taxes, market prices, exchange rates, etc.

Firstly, you should contact an expert who can help you understand what taxes you have to pay in the UK and Denmark. Before applying for a new loan, you should always have an expert read through the paperwork, as they may pick up on something you haven’t.

It would help if you watched for the additional costs that sneak up slowly but surely. For example, a small change in exchange rates between the Pound and Euro could completely shift your mortgage repayments.

To avoid mortgage debt and credit risk, we recommend choosing a trusted lender to warn you if the exchange rate increases by more than 20%. In that case, you can pay in a different currency.

 

What if you’ve been living in Denmark for a while?

Just like the nationals of Denmark, if you’ve been living there for more than five years, you get the right to have a mortgage. Anybody who has been there for less than five years will be passed directly onto the Danish Ministry of Justice to ask permission to live in their country.

If you’re struggling to obtain a Danish mortgage and know that if granted permission, you’ll stay there a while, then you should consider opening up a business in Denmark, which will greaten your chances of getting a Danish mortgage.

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What if you want to buy a holiday house in Denmark?

This process should take about 8-10 weeks. Similarly to the above, you must apply through the Danish Ministry of Justice with sufficient evidence of past holidays in the country alongside your regular application.

 

Where to live in Denmark?

Here are the top five cities to live in if you get a mortgage in Denmark:

  • Odense (the cheapest place to live in Denmark)
  • Copenhagen (the safest place to live in Denmark)
  • Aarhus (the best for arts and culture)
  • Esbjerg (great for job opportunities)

 

What else to consider about mortgage loans in Denmark?

Additional fees

The majority of fees you’ll have to pay are:

  • Mortgage banks’ admin fee
  • Income tax
  • Broker fee
  • Annual property tax

To get a mortgage in Denmark, there are fixed rate fees of 0.1% of the mortgage price, with an additional fee priced at 300 Euros.

Interest rates

There are seven significant mortgage banks in Denmark that are the most common mortgage providers. However, an expert can help you find the best mortgage bank with the best interest rates.

You should always try and stay up to date with the latest interest rates, as a change in price could result in great refinancing options.

Mortgage bonds

If you haven’t heard of mortgage bonds, they are essential security ensuring high real estate market liquidity. Also, Danish mortgage bonds are great security for international buyers. The majority of mortgage loans in Denmark come from people’s mortgage bonds.

A person’s interest rate and mortgage bonds go hand in hand. So if bond prices go down, interest prices go up.

Legal advice

Danish mortgage banks have lots of legal paperwork to read through and understand. It’s highly beneficial to hire a solicitor, or someone that understands property law, to help you with your application process so you can avoid extra fees.

Expert advice

Many mortgage loans are available to anyone wanting to reside in Denmark, but it’s all about finding the right place with the right lender. To get to this, you need an expert who can direct you where to go, saving you time and money in the long run. The right advisor can help you navigate the competitive prices of loans in real property.

If you’re using a UK expert advisor to help you obtain a mortgage in Denmark, you must ensure that they’re qualified in the country and have experience getting mortgages in Denmark.

Overseas mortgage banks

At LoanCorp, we can set you up with an expert international lender so you can receive the mortgage financing you need.

Over several months, you should seek the help of the following for Danish mortgages:

  • A solicitor to read through your paperwork and help you understand legalities
  • An estate agent to help you find a place
  • A Danish broker that has expert knowledge of Denmark
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FAQs

Can I get a loan in Denmark?

Yes! You can get mortgage loans in Denmark. It can sometimes be a long process due to the language barrier and a borrower’s lack of knowledge of the country. Still, with a UK expert advisor directing you, you’re guaranteed to find a great broker who can polish off your application and match you with a lender eager to accept!

What are mortgage bonds?

A mortgage bond is a way for investors to invest in real estate. Owning a mortgage bond – which is traded on the open market – allows investors to earn interest until repayment terms are fulfilled. The security for investors is that the bonds are secured by residential real estate as collateral.

Can borrowers redeem their loans?

Yes, borrowers can request that the mortgage bank buy back the mortgage bonds originally used when applying for the mortgage loan.

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