All properties in Denmark and details regarding ownership and mortgages must be registered with the Danish Land Registry before any dealings with third parties take place. Foreigners looking to secure a mortgage in Denmark have the same rights as their Danish counterparts without any additional legal or governmental restrictions.
Most mortgages in Denmark are provided by one of the seven major mortgage banks, the two largest being Realkredit Danmark and Nykredit. You can usually borrow up to 80% of the value of the property, usually to be repaid over a period of 10 to 30 years.
The vast majority of mortgages in Denmark are funded by bonds issued in the capital market. You can get either get a fixed rate or a variable rate mortgage, with rates linked to the price of these bonds. When bond prices rise, mortgage interest rates fall and vice versa.
Interest rates on a Danish mortgage are agreed on the same day as when the mortgage is issued. The competition between lenders means that borrowers benefit from significantly lower rates than they would in other EU countries. Mortgage arrangement fees are fixed at 0.1% of the value of the mortgage plus a fixed fee of around €300.
Advantages of Danish mortgages
There is no need for mortgage brokers in Denmark because the competition between mortgage lenders is so strong.
Furthermore, it is fairly easy for borrowers to refinance their mortgages if they wish to, for example if interest rates were to fall. Financing of Danish mortgages is generally quite flexible, so you should always keep an eye on the market and ask your solicitor or estate agent for advice.
In fact, the Danish mortgage system has been so successful that a number of developing countries are likely to adopt the Danish system themselves.
Disadvantages of Danish mortgages
Mortgage lenders in Denmark are generally more interested in the value of the property rather than the borrower’s ability to repay money. This means that Danish mortgage lenders are less patient with borrowers who cannot make repayments, as a result they are much quicker to repossess property than in other European countries.
Despite this it is still hard for borrowers with a poor credit history and first time buyers to get a mortgage.. The 20% down payment when buying property also acts as a major obstacle to getting onto the property ladder.