Can I get a Swedish mortgage without permanent residency?
The Swedish rental market is notoriously difficult for immigrants to break into, so many consider buying a property instead. But can you get a Swedish mortgage without a permanent residence permit?
The answer, as with many of these questions, is "it depends".
Do I need permanent residency?
There is no legal requirement that mortgage holders in Sweden must be permanent residents, citizens, or even registered in the country.
On the other hand, there is no legal requirement for banks to accept mortgage applications from just anyone either, which leaves them perfectly within their rights to deny applications to temporary residence permit holders if they deem them to be too big of a risk.
Why might a bank say I need permanent residency to take out a mortgage?
One reason your bank could require you to have permanent residency is that they deem it too risky to lend to someone who they think might not be staying in Sweden for long enough to pay off their mortgage.
Banks want to be reassured that they will get their money back if they lend to you, and if you don't have permanent residency in Sweden, there's always a chance your temporary residence permit will run out and a renewal might not be approved, leaving you forced to leave Sweden before you've had time to pay off your loan.
Similarly, banks which may once have been more willing to approve mortgage applications to more "risky" applicants may be more wary after a year of falling house prices and rising interest rates (although interest rates on mortgages have slowly started going down again).
Ultimately, a temporary residence permit is one of many risk factors for a bank – if you're forced to (or choose to) leave Sweden after a short while and your property has lost value, that could leave you in a position of negative equity – where you owe the bank money after you sell your property.
Is there anything I can do to make sure I don't get my mortgage application rejected?
First off, mortgage applications are often stressful – you've successfully bid on a property and you've set a date for signing the contract, so you want to get your paperwork in order and make sure you can finance the property quickly.
Additionally, banks are slow, so the last thing you want is to wait days just for your bank to turn you down for a mortgage.
The best way to ensure you get a mortgage approved in time is to keep your options open and apply to multiple banks, as different banks weigh different risk factors more highly than others.
Danske Bank, for example, appear to reject mortgage applications for people without permanent residency, as I was told when my mortgage application with them was rejected.
Just applied for a mortgage with the Swedish branch of Danske Bank after they granted us a loan promise and was denied as I don't have a permanent residence permit in Sweden, despite applying with my Swedish husband. Has anyone else experienced this with other Swedish banks?
— Becky Waterton (@BeckyWaterton) August 10, 2022
Be aware though, that every time a bank takes out a credit check on you, this affects your credit rating. A good way to get around this is to apply for a mortgage via services like Ordna Bolån and Lånekoll, who take out a single credit check for you and use that to apply to multiple banks on your behalf.
Another way to increase the chance of your application being approved is to borrow less money, if you can. Just because your bank has given you a maximum budget you can buy for in your lånelöfte or lender's note, doesn't mean you have to buy for that much, and the less money you apply to borrow, the more likely the bank is to approve your application.
There's another benefit to this, too: it lowers your belåningsgrad, or the percentage of the property's value you're financing with your mortgage. If you borrow more than 70 percent of a property's value, you have to amortise (pay back) 2 percent of the value of your mortgage per year. If you borrow between 50 and 69 percent, you must amortise 1 percent of your mortgage per year, and if you borrow under 50 percent of the property's value, you don't have to amortise anything (although it could still be a good idea to do so, if you can).
Additionally, in Sweden there is something called a skuldkvot or "debt quota", meaning if the amount you're borrowing is more than 4.5 times your yearly salary (or the yearly salary of you and your co-applicant, if you're applying with someone else), you need to amortise an additional 1 percent per year, on top of anything you have to amortise based on the percentage of the property's value you're borrowing from the bank.
This means, if you can put in enough cash to reduce your belåningsgrad from above 70 percent to under 50 percent, as well as loaning less than 4.5 times your yearly salary, you can cut down your amortising from 3 percent to nothing.
This will all be factored in by the bank when deciding if you can afford to pay your mortgage, too, so cutting down your monthly costs will make it more likely for them to approve you.
Finally, have a look at the driftkostnad (running costs) for a house, or the avgift (monthly fee) if buying an apartment or terraced house in a bostadsrättsförening (BRF) housing co-operative. The lower this is, the lower your monthly cost, and the more likely your bank is to determine that your monthly costs aren't too high in relation to your income.
Are there any other reasons foreigners might be rejected from buying property in Sweden?
Many – but not all – banks require mortgage applicants to be registered in the Swedish population register (this means you need to have a personnummer) and have your salary paid out in Swedish kronor.
If you earn money in another currency, this doesn't necessarily mean you can't get a mortgage, but it could mean that you can't loan as much as you could if you were paid in Swedish kronor.
This is due to the fact that banks will always be conservative in their calculations when deciding if you can afford to pay back a loan (especially so in the current climate), and will calculate your budget based on how much your income would be worth if the currency you are paid in became much weaker than the krona, despite the fact it could be much stronger at the time you apply.
Some may require that you have BankID in order to apply for a mortgage, which in practice also means you need to have a personnummer and a Swedish bank account.
These criteria aren't usually published on the banks' websites and could change as lenders seek to reduce their risk, so call your bank in advance to ask if you want to be sure.
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The answer, as with many of these questions, is "it depends".
Do I need permanent residency?
There is no legal requirement that mortgage holders in Sweden must be permanent residents, citizens, or even registered in the country.
On the other hand, there is no legal requirement for banks to accept mortgage applications from just anyone either, which leaves them perfectly within their rights to deny applications to temporary residence permit holders if they deem them to be too big of a risk.
Why might a bank say I need permanent residency to take out a mortgage?
One reason your bank could require you to have permanent residency is that they deem it too risky to lend to someone who they think might not be staying in Sweden for long enough to pay off their mortgage.
Banks want to be reassured that they will get their money back if they lend to you, and if you don't have permanent residency in Sweden, there's always a chance your temporary residence permit will run out and a renewal might not be approved, leaving you forced to leave Sweden before you've had time to pay off your loan.
Similarly, banks which may once have been more willing to approve mortgage applications to more "risky" applicants may be more wary after a year of falling house prices and rising interest rates (although interest rates on mortgages have slowly started going down again).
Ultimately, a temporary residence permit is one of many risk factors for a bank – if you're forced to (or choose to) leave Sweden after a short while and your property has lost value, that could leave you in a position of negative equity – where you owe the bank money after you sell your property.
Is there anything I can do to make sure I don't get my mortgage application rejected?
First off, mortgage applications are often stressful – you've successfully bid on a property and you've set a date for signing the contract, so you want to get your paperwork in order and make sure you can finance the property quickly.
Additionally, banks are slow, so the last thing you want is to wait days just for your bank to turn you down for a mortgage.
The best way to ensure you get a mortgage approved in time is to keep your options open and apply to multiple banks, as different banks weigh different risk factors more highly than others.
Danske Bank, for example, appear to reject mortgage applications for people without permanent residency, as I was told when my mortgage application with them was rejected.
Just applied for a mortgage with the Swedish branch of Danske Bank after they granted us a loan promise and was denied as I don't have a permanent residence permit in Sweden, despite applying with my Swedish husband. Has anyone else experienced this with other Swedish banks?
— Becky Waterton (@BeckyWaterton) August 10, 2022
Be aware though, that every time a bank takes out a credit check on you, this affects your credit rating. A good way to get around this is to apply for a mortgage via services like Ordna Bolån and Lånekoll, who take out a single credit check for you and use that to apply to multiple banks on your behalf.
Another way to increase the chance of your application being approved is to borrow less money, if you can. Just because your bank has given you a maximum budget you can buy for in your lånelöfte or lender's note, doesn't mean you have to buy for that much, and the less money you apply to borrow, the more likely the bank is to approve your application.
There's another benefit to this, too: it lowers your belåningsgrad, or the percentage of the property's value you're financing with your mortgage. If you borrow more than 70 percent of a property's value, you have to amortise (pay back) 2 percent of the value of your mortgage per year. If you borrow between 50 and 69 percent, you must amortise 1 percent of your mortgage per year, and if you borrow under 50 percent of the property's value, you don't have to amortise anything (although it could still be a good idea to do so, if you can).
Additionally, in Sweden there is something called a skuldkvot or "debt quota", meaning if the amount you're borrowing is more than 4.5 times your yearly salary (or the yearly salary of you and your co-applicant, if you're applying with someone else), you need to amortise an additional 1 percent per year, on top of anything you have to amortise based on the percentage of the property's value you're borrowing from the bank.
This means, if you can put in enough cash to reduce your belåningsgrad from above 70 percent to under 50 percent, as well as loaning less than 4.5 times your yearly salary, you can cut down your amortising from 3 percent to nothing.
This will all be factored in by the bank when deciding if you can afford to pay your mortgage, too, so cutting down your monthly costs will make it more likely for them to approve you.
Finally, have a look at the driftkostnad (running costs) for a house, or the avgift (monthly fee) if buying an apartment or terraced house in a bostadsrättsförening (BRF) housing co-operative. The lower this is, the lower your monthly cost, and the more likely your bank is to determine that your monthly costs aren't too high in relation to your income.
Are there any other reasons foreigners might be rejected from buying property in Sweden?
Many – but not all – banks require mortgage applicants to be registered in the Swedish population register (this means you need to have a personnummer) and have your salary paid out in Swedish kronor.
If you earn money in another currency, this doesn't necessarily mean you can't get a mortgage, but it could mean that you can't loan as much as you could if you were paid in Swedish kronor.
This is due to the fact that banks will always be conservative in their calculations when deciding if you can afford to pay back a loan (especially so in the current climate), and will calculate your budget based on how much your income would be worth if the currency you are paid in became much weaker than the krona, despite the fact it could be much stronger at the time you apply.
Some may require that you have BankID in order to apply for a mortgage, which in practice also means you need to have a personnummer and a Swedish bank account.
These criteria aren't usually published on the banks' websites and could change as lenders seek to reduce their risk, so call your bank in advance to ask if you want to be sure.
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