Getting a Swedish mortgage

So you’ve found your dream apartment, now you just have to pay for it. It’s time for an avalanche of bank applications, tax forms, and credit checks.

Malin Collman is a personal financial advisor at Handelsbanken in Stockholm and works with home loans. She said that the loan process should take about a week, and the borrower is subject to a credit check and must provide evidence of stable income. There are no restrictions on foreigners purchasing property in Sweden, but they will often have no credit history in Sweden.

“In that case, I would need proof of permanent employment in Sweden,” Collman says.

You will also need funds for a downpayment. “The size of the downpayment is determined in each individual case. It should reflect 15-25 percent of the acquisition price,” Collman says.

That just covers the interest on the loan, not the loan itself. Many people choose not to pay off the capital on the loan. “This is usually done when you sell the apartment,” says Collman.

It also depends on the size of your down payment. “If you make a down payment of 25 percent, you don’t have to pay a monthly amortisation,” she explains. Otherwise, she says you can budget for an extra payment of 500-1000 kronor.

The following scenario illustrates how the financing might look.

Assume the acquisition price of an apartment is 1,095,000 kronor (a price that according to the statistics from Mäklarstatistik for the period December 2006 to March 2007 would get you a 28 square metre studio apartment in the Stockholm region, or a 58 square metre one-bedroom apartment across Sweden as a whole).

At this price, a 25 percent downpayment would be 275,000 kronor. That would leave a mortgage of 820,000 kronor. At a one-year fixed interest rate of 4.23 percent, the monthly payment would be 2,891 kronor.

But not all of that is out of pocket. “If you receive your salary in Sweden, 30 percent of the interest on loans is tax deductible,” says Collman. In this scenario, a 30 percent deduction would mean a monthly tax break of 867 kronor. After the deduction, your monthly mortgage payment would equal 2024 kronor. The borrower can choose if deductions occur on a monthly basis or at the end of the year.

Add to that a monthly fee to the tenant’s association of 2,135 kronor. That brings total housing expenditures up to 4,159 kronor per month, which should be affordable for an individual with a monthly gross income of around 24,000 kronor.

Collman says that each case is unique, so it’s difficult to estimate what minimum monthly income someone would need to get a bank loan.

“Every customer is individual, depending on other expenses. Therefore it’s very hard for me to pick an exact figure. But I would say that the scenario mentioned above is normal,” she says.

Her advice is to make a budget and stick to it. “Set a fixed amount that you are able to pay per month,” she recommends.


All you need to know to get a Swedish apartment

Get a dictionary, get in line and know your rights. Finding an apartment in big Swedish cities will never be easy, but there are some things you can do to make your life easier:

  • Get a dictionary. Learn what “bostad” and “uthyres” mean. Even if you don’t speak Swedish, learning a few words of “real estate ease” makes the process much easier.

  • Word-of-mouth. Let everyone you know that you are looking for an apartment. Your hairdresser’s husband’s first cousin’s officemate can provide invaluable leads in the apartment hunt.

  • Get in line. Looking ahead, it’s well worth signing up for the municipal housing queue, despite an annual fee of a few hundred kronor. In Stockholm, this is run by Stockholms Stads Bostadsförmedling AB. (There are organisations similar to Stockholms Stads Bostadsförmedling in most Swedish cities).

  • Go to school. If you’re enrolled at one of the universities in Sweden, you’re eligible for student housing. Make sure you sign up for the student housing queue. You’re not likely to get something right off the bat, but there’s no cost to register. This is particularly the case in larger cities like Stockholm, Uppsala, Gothenburg, Malmö, and Lund. In an effort to attract more students, several smaller university towns – including Eskilstuna, Gävle, Västerås, and Örebro – have implemented accommodation guarantees (bostadsgarantier) that promise housing to all students opting to study there.

  • Get it in writing. Even if it’s a second-hand rental, make sure you have a contract. Also get receipts for any payments. If there are any disputes later on, the burden of proof rests on you.

  • Bostadsbidrag. If you have kids or you’re between the ages of 18 and 29, you might be eligible for a housing allowance, depending on your income and whether or not you’re covered by the Swedish social insurance system. Contact your local “Forsäkringskassan” for more information, or check out their website (Swedish only).

  • Know your rights. Second-hand tenants can go to the rent tribunal (hyresnämnden) and get the size of the second hand rent tried if the original lease holder is charging significantly more than the actual rent. A small percentage is allowed for furniture, but it shouldn’t exceed 10% of the total rent. If you think you’re being taken advantage of, talk to a lawyer.

Charlotte West