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Acquisition of a dwelling in Denmark

You should discuss issues related to acquisition financing with your legal and financial advisers. Is the acquisition to be financed by cash or by borrowing? If borrowing is inescapable which methods of finance are to be selected? Which banking loans and products are required?

It is the financial circumstances and the future plans of the borrower that settles the type of the acquisition finance.

These costs are almost always involved irrespective of the type of finance:

Attorney’s fee:

The lawyer charges for legal advice and drawing up the documents listed below:

Owner’s mortgage
Seller’s mortgage
Completion statement and
Deed

To reduce the costs, some borrowers decide not to use legal counsel, but it is a lawyer who makes sure that the agreement lives up to the expectations and serves the interest of the purchaser. The lawyer’s fee is negotiated individually.

A total registration fee:

The purchaser must pay the registration fee for the deed, a seller’s mortgage and for the registration of the documents. The seller is charged for the registration of the seller’s mortgage.
The registration of a mortgage over real estate is subject to the following registration fee:
1, 5 % of the secured amount plus DKK 1.400 (duty to the state) or 0,6% of the purchase price + DKK 1.400(duty to the state).

Cash payment and Cash payment price:
The acquisition can fully be paid in cash if the purchaser is able to provide the required amount in cash. The cash price is useful when comparing prices for possible future purchases. Comparing cash prices provides a clearer picture, because the conditions and fees depend on the type of the loan can be difficult to understand.

You can borrow up to 80 % of the cash price:
Loan secured in real estate gives a possibility to borrow up to the 80% of the cash price. Then the purchaser typically makes a seller’s mortgage or obtains a bank loan to finance the last 15 % of the purchase price. The last 5 % of the purchase price are paid in cash by the purchaser or financed by a bank loan.

Types of loans:
Bond’s prices are a good indicator of the loan expenses. Different types of loans are available when the acquisition is financed by a bank loan.
The conditions and loan options depend on the institution which provides the loan. A common item for all the traditional types of loans is that they all are based on the short terms bonds or on long terms bonds.

Generally there are 4 different kinds of loans to choose from:

Cash loan, Bond loan, Adjustable interest rate loan free of amortization
There are many nuances of the loans f. ex. with different terms and variable nominal interest rates.

Foreign currency:
The loan can be obtained in DKK or in EURO. The choice of the foreign currency depends on the difference between the Danish and the foreign interest rates, currency rate; the currency in which the salary is paid. Sometimes it is possible to take over the existing loans in the estate.

Loan in EURO
If the pay is delivered in EURO, then it may be advantageous to obtain the loan in EURO. Cash loan, bond loan and adjustable interest rate loan can be obtained both in EURO and in DKK. Even though Denmark’s currency is not EURO, several mortgage credit institutions lends in EURO. The loans are identical with the loans obtained in DKK regarding terms, credit limits etc. If the income of the borrower is paid in EURO, then it can be an advantage to obtain the loan in EURO because there then is no currency risk. If the income of the borrower is paid in DKK, then the reason to obtain the loan in EURO can be economic measures on interest.

When you estimate the value of the property, compare the gross and net payments:

The gross payment is the monthly payment before taxes and consists of:

1. Loan secured on real estate,
2. Real estate tax,
3. Property insurance
4. Costs for drain and renovation
5. House owners association
6. Chimney sweeping

If the type of the property is a condo then the common expenses are also included in gross rent.

Electricity, water bill, heat, tax on value property and some insurance f. Ex. Household furniture insurance are not included in gross rent. It is the gross rent amount which is paid monthly.
Net payment is the monthly payment after the deduction of interest (payment after the deduction of all tax allowances and deductions).

The role of taxes is significant. The purchaser should ask the estate agent to calculate the monthly net payments of the purchaser considering the tax circumstances of the purchaser. As an alternative please contact Inwema.

How large is the monthly payment?

In the sales ads the monthly payment is calculated on the basis of the existing loans in the estate. In addition to this, 3 additional ways of financing are also to find in the most sales ads. When the type of financing has been selected, then the gross and the net payment can be calculated with assistance of your financial adviser.

Interest costs:
All interest costs can be deducted from the taxable income. There is considerable interest costs related to purchase of real estate. All costs can be deducted from the taxable income, the part of the income of which the taxes are calculated. 


Appartements in the Copenhagen Area

www.UrHousing.com 

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