Lately, we’ve been getting questions related to buying property in Sweden. Now, there is a lot to consider when you are buying a home anywhere on earth and we are unfortunately not going to get in to all that here. But one basic thing you want to get right is to get the best deal on your house loan – mortgage.
So here we are going through a couple of things related to a mortgage in general and some that is specific to Sweden.
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1. Make a mortgage calculation
The first thing to do is a mortgage calculation. What do your income and expenses look like? Do you live alone or with someone? Most banks offer a mortgage calculation service on their websites and with this calculation you get an idea of how much you can borrow and what you can afford to buy. Look at the prices in the areas you want to live. Then calculate how much money you can contribute directly, you will need to have at least 15 percent of the property price in hand in order to get a property loan.
Once you know your loan amount, you calculate the interest cost. Calculate with different interest rates so that you can see how your cost changes if the interest rate goes up. According to the new repayment rules, you must also repay about 1-2 percent of the loan if the loan exceeds 50 percent of the home’s market value. Also, do not forget that you pay a fee every month to the tenant-owner association in addition to interest and repayments.
2. Compare your loan possibilities
We don’t all get the same deals from the banks. After all, our loan is their business and they want to make sure they get their money’s worth out of it. This means that different banks can and will offer different interests rates, deals and set ups for you. So in order to get the best deal, you will have to shop around. One problem with asking each individual bank what THEIR deal for you would be is that each time they will check your credit score and as many of you know, a lot of checking of the credit score – will bring the credit scores down. So how do you solve that? Cue – the loan comparison services. These services are fairly easy to use:
- You visit their website and find the section called “Låna till ny bostad”. Annoyingly, these websites are largely in Swedish.
- You will need to log in using a Swedish BankId.
- You fill in a bunch of information about yourself, your partner and family (if you have either of those), your job and financial situation.
- You also fill in information about the type of property you are looking for and how much money you are willing to spend and how much money you already have.
- Your application is take care of by a real person who will check the options for you specifically.
- They usually get back to you within 24 hours.
- If you choose one of the options, they will help you with the practicalities.
- It is free of charge to send in the comparison request.
- And as mentioned before, your credit is only checked once even if you get a bunch of options back.
Loan comparison services
- Compriser* The information on Compricers website is in Swedish but Google Translate should help you. To get started chose the button in their top menu called “Bolån” and then “Låna till ny bostad” (borrow to new property). Then activate your Google Translate so you can answer their questions. You will need to login with BankId.
- Insplanet* has a sister company called Zmarta that handles the loan section. Follow the link here and then click on the link at the very top of their website which says “Gå till Zmarta”. Once you get there, chose the menu options “Bolån –> Köpa bostad”. Then activate Google Translate. You have to login with BankId.
- Comboloan* This website is easy to navigate for the non Swedish speaker. Once you get to their page, chose the top menu option “Bolån”. They then have two large buttons. Chose “Köpa bostad” if you are buying a new property and chose the button “flytta bolån” if you already have a mortgage and want to shop around for a lower interest rate.
2. Apply for a loan promise
So, now you know how big a mortgage you can get, the max cost of your future property and the expenses that you can handle. It is now time to contact the bank where you got the best deal to get a loan promise – lånelöfte. A loan promise is a message from the bank that shows how much you can borrow. It costs nothing to get a loan promise and it is not binding. The loan promise is usually valid for six months and is based on your finances. Loan promises gives you an idea of what your financial framework looks like before bidding.
4. Set a maximum bid limit
You’ve found a place you like and you want to place a bid. The most important thing before you place a bid is to decide where your maximum bid limit goes. Stick to it, do not forget the amount in the loan promise even when the bidding goes haywire and you are overwhelmed by your feelings for the apartment. A bidding can be an emotional roller coaster, be prepared for that. And remember, your offer is not binding until you have signed the contract.
5. Have the down payment ready
When you have won the bidding, you should contact your bank who will make an assessment of the home and convert the loan promise into an application for a mortgage. In connection with the purchase, you must pay a down payment that is usually 10 percent of the purchase price.
6. Collect your finances at the bank for better interest rates
When the bank determines the interest rate, they are based on an average interest rate, but you can always negotiate with the bank about the interest rate. You need to show the bank that you are a valuable customer. Can you put more of your commitments in the bank, such as savings, pension savings and insurance?
We have some interesting posts on the subject written by our bloggers. Check them out or scroll down to the related reading section at the bottom of the page.