Do you want a home loan? Then there are several options. The main rule is that you must, as far as possible, be a mortgage if you can be approved for this, as Danish mortgages are among the best and cheapest loans in the world.
Have you been turned down for mortgages? Then you are unfortunately one of many Danes, as it has become significantly more difficult in recent years to get credit approved for mortgages from banks and mortgage banks due to further tightening from the Danish Financial Supervisory Authority.
However, nothing is so bad without being good for something else. The tightening of lending policy for traditional mortgage and bank loans has led to a revival of the new loan type “Property Credit Loans” (of which Loan and Credit is one of the leading intermediaries).
New Alternative: Property Loans
The mortgage loan is a new alternative to mortgage loans, aimed at Danes who either do not want or can get a mortgage in the bank. The advantage of real estate loans is that it is independent, the banks are credit policies, and many of the constraint that follows, which means it is significantly easier to get credit approved for that mortgage loan compared to eg. mortgage loans or bank loans.
The downside to real estate mortgages is that the interest rate is a bit higher, as investors behind the loans want a higher interest rate to help those who cannot be approved for a mortgage.
The interest rate on real estate loans fluctuates continuously, but is typically in the level of 5-9% depending on the applicant’s finances, the quality of the property and the choice of fixed or variable interest rates.
Mortgage loans should be applicable in connection with loans for home purchases and mortgages on the home value of existing housing.
The biggest tightening
When a bank or mortgage lender needs to lend you a home purchase or up in the face value, lots of money, it is clear that they have some requirements on you as a borrower so that they are as confident as possible that they will get that money back.
Figures from Danmarks Nationalbank show that mortgage banks continue to tighten requirements on borrowers, and that credit policies are further tightened in banks and mortgage banks, as regulation by the Financial Supervisory Authority of Norway increases.
The Financial Supervisory Authority came up with a guide in January 2016 calling for caution in credit assessments – especially when borrowing in areas such as Aarhus and Copenhagen, which are growing rapidly. And it is on the basis of this guidance that the mortgage lenders continue to tighten here over a year later.
But even before the Financial Supervisory Authority’s guidance, private borrowers experienced tightening requirements. One of the most decisive decisions was the imposition that one has to pay 5% of the loan amount as a down payment on home purchases. It was adopted at the end of 2015. A decision that also helped to tighten requirements and credit policy – and which challenges many, especially first-time buyers, when going out and investing.
This has consequences
Credit policy tightening is mainly due to the attempt to avoid a price bubble, the housing market being artificially maintained and people borrowing money they will never be able to repay.
Many of the austerity measures are therefore also made to keep house prices down and to ensure a healthy housing market. But even despite the rule that you can pay 5% of the loan amount, house prices in Copenhagen in particular have risen sharply in 2015 and 2016. However, there is nothing to indicate that we are in the middle of a housing bubble, but more that prices are an expression of greater and greater demand.
This is how the coming years will be
Unfortunately, there is no indication that loans for housing through the banks will be easier to obtain. In fact, there are many indications that the coming years will probably offer further austerity from the Danish Financial Supervisory Authority.
All this means that more Danes will have to look for more expensive alternatives such as. mortgage loan or real estate loan to finance a home purchase, a home loan, or borrow at the face value.
The tightening of credit policy is also starting to take hold, and therefore we will not see any sharp increases in house prices in the future.
This is how it looks in business
While the requirements for private borrowers have tightened in recent years, there has actually been a positive development in an established business community where it has actually become easier to lend to everything from properties to extensions to production capacity.
Thus, over the past few years, it has become easier for business to invest because better access to mortgage loans has come. As they are the most efficient loan form with the lowest interest rate, the business community has ample opportunity to invest in the property and thus implement extensions and other new initiatives – and this is good for Denmark’s growth.
Contrary to the established business world, it is still very difficult to lend to many less self-employed traders. This is what we actually wrote another blog post about: So hard to self-borrow