- Study the housing market
You're best placed to make a good home deal if you've prepared well before you make an offer.
Good preparation might include researching:
- How much the seller needs to get rid of the house - have they bought a new one, if applicable?
- What have similar homes in the area cost?
- How many times has the home been for sale in the past 30 years?
- Whether the price has been reduced in the past.
Sites such as www.boligsiden.dk and boliga.dk are very good sources of knowledge about the housing market. For example, you can check the supply of similar homes in a defined area and find historical sales prices for similar homes.
- Go over the house thoroughly
It's always a good idea to do a thorough inspection of the home so you don't buy a property with damage you didn't know about.
The condition report can give you a clue, but it may also be a good idea to get a professional with a building background to go through the house with you.
A thorough check can save you a lot of hassle and money later on. If the inspection reveals defects and damage to the home, it could help you get a price reduction or prevent you from buying a poor-quality home.
- Defects and shortcomings
When faults or defects are discovered, the first thing many people do is try to get a reduction in the price of the house, but this is not always the best idea.
It may be worth making an agreement with the seller that things will be fixed at their expense before you move in, if you are unsure how much it will cost to do the work.
If it's a small job that you can do yourself, it may be better to get a discount. Ask for a discount equivalent to the price of a tradesman and repair the damage yourself.
- Paid legal and financial advice
In a housing transaction, it will often be a requirement in the purchase agreement that you use a lawyer for rectification, which is the purely practical implementation of the housing transaction with registration of the deed, preparation of the refund statement, etc.
You will typically be faced with a choice between a full package, which includes legal advice, including review of all the transaction documents, or a cheaper version, where the lawyer only takes care of formalised tasks such as drafting the deed, registering the property and drawing up the reimbursement statement.
A solicitor is often a very small cost when compared to the actual property transaction, and in our experience a solicitor often pays for itself when you look at the costs that a buyer is saved by the solicitor's advice.
- Talk to the bank and find out if you should take over the seller's loan
Finances are at the heart of the housing transaction and you will usually have the option to take over the seller's mortgage. If it's a loan type that suits your finances, this can be an advantage. It will save you the costs of, for example, registration fees and brokerage fees associated with taking out a loan of the same size.
If you need to borrow more than the principal of the seller's existing loan, you can take out an additional loan.
Information about the type of loan the seller has will normally be included in the sales listing. The mortgage lender must approve you taking over the loan.
- Explore options with different banks and mortgage lenders
It can usually be tempting to take out a loan where you already have your accounts, as it is both safe and easy. However, we always recommend investigating alternatives and comparing prices and interest rates.
You can usually finance up to 80% of the value of your property through a mortgage. Most first-time buyers pick up the next 15 per cent of the purchase price as a bank loan, while the 5 per cent down payment is mandatory.
There can be wide variations in both mortgage companies' contribution rates and the bank's fees and interest rate on the mortgage. That's why it pays to research the financial products market online.
- Use your savings and avoid expensive mortgages
If you have savings in shares, bonds or something else, it might be worth selling them and making a bigger down payment on your home instead. This may be particularly relevant if you need to take out a bank loan at a high interest rate.
You can compare your annual return on your securities with the interest cost of the bank loan. If the return is lower than the annual interest cost of the bank loan, you may want to consider putting the savings towards the down payment on the home, thus minimising your borrowing costs.
- Find the cheapest insurance
Check where you can get the cheapest house insurance, as prices on the market can vary widely. It may also be worth checking whether you are covered by a professional group that can make use of extra cheap insurance terms, such as Lærerstandens Brandforsikring, Bauta Forsikring, etc.
- Repayments on your loans
Repayment freedom can be expensive in the long run. Overall, you'll spend more on interest and contributions, and you'll be more financially vulnerable if house prices fall.
If you have an adjustable-rate mortgage, it's particularly advisable to pay off as much as possible while interest rates are low. This will save you money when interest rates rise, because you will have to pay interest on a lower amount.
However, check whether you are better off financially by getting an instalment facility on your mortgage and instead using the saved instalments to pay off your bank loan more quickly. A bank loan usually has a higher interest rate than a mortgage.
- Think long-term
It's a bad investment to buy a home you'll only live in for a few years. Just as it is expensive to buy a home, it is also expensive to sell.
Expect the cost of selling and buying a new home to run to 8-12% of the price of the home. So make sure you find a house you can live in for many years to come. This reduces the risk of having to put money down when the house has to be sold again.