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Home buyers in rural Denmark could benefit from government finance plan

The Danish government on Friday published a proposal for a new law which could ease the path for house buyers in rural areas.

Published: 12 November 2021 14:10 CET

The government wants to make it easier to get a mortgage in rural areas, but lenders say they do not base loans on location.

The government wants to make it easier to get a mortgage in rural areas, but lenders say they do not base loans on location. Photo: Henning Bagger/Ritzau Scanpix

The proposal, which would need backing in parliament, could give buyers the option of loaning 30 percent of the value of their home from the state.

“We in the government have long worked to find the right model for supporting Danes who want to live outside of cities so they can finance purchasing their homes,” Prime Minister Mette Frederiksen told Avisen Danmark.

“I’ve met many people on trips around the country who have told me how they can’t get a loan for their dream home because it is located in the wrong area code,” she added.

Specifically, the government plans to table a bill in which the state will underwrite the majority of a mortgage which constitutes between 60 and 90 percent of the property’s value for privately owned housing.

A criteria for the scheme will be that the property must have a value of under 8,000 kroner per squre kilometre or must be located in an area code in which the average value of property is below this level.

Finans Danmark, the interest organisation for Danish banks and credit institutions, said it did not see a trend of mortgages in rural areas being rejected based on location.

“It’s absolutely the exception that a ‘no’ will be given to a mortgage, and that applies both in cities and in the countryside,” Finans Danmark’s deputy CEO Ane Arnth Jensen said.

“When the answer is ‘no’, it is mostly because of a lack of funding in the family and there will therefore still be some Danes who get a ‘no’ to a loan,” Jensen added.

A total of 16,396 mortgages were given for purchase of homes in rural areas in Denmark in 2020, according to the organisation. That is an eight percent increase compared to 2019.

READ ALSO: The challenges of buying a home in Denmark as a foreigner

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Can foreigners buy a summer house in Denmark?

Many people in Denmark spend their holidays living in summer houses, properties in which residence is not usually permitted year-round.

Rules preventing permanent use are in place to ensure summer house areas remain recreational in nature; to limit new construction in valuable and uninhabited coastal areas; and to protect natural landscapes from wear and tear.

READ ALSO: Summer houses in Denmark: What are the rules and when can you live in them?

While renting is a popular choice, owning a summer house is also relatively common and may be a financially viable option, depending on your budget and plans for vacationing and use of the property.

Foreign nationals who have lived in Denmark for less than five years are required to apply for permission to buy real estate with the Ministry of Justice’s Department of Civil Affairs (Civilstyrelsen). This also applies to Danes who have lived abroad.

Foreign nationals looking to buy property can face additional challenges, including minimum residency requirements and banks asking for a higher down payment on mortgages.

READ ALSO:

However, the Ministry of Justice’s Department of Civil Affairs (Civilstyrelsen) states that, for both permanent homes and non-permanent or seasonal dwellings like summer houses, foreign nationals can be given permission to purchase properties, even if they have lived in Denmark for less than five years.

The application for to acquire a seasonal dwelling (such as a summer house) can be found here. The rules can be explored in full detail here.

I have lived in Denmark for less than five years. Will my application be accepted?

Citizens of EU countries are normally exempted from residence requirements because of EU free movement laws. As such, citizenship and not residence or previous stay in Denmark is decisive and EU citizens can generally acquire real estate in Denmark.

However, if you want to buy a holiday home this does not apply and the five-year residence requirement takes precedence – regardless of whether you have EU nationality.

If you don’t meet the five-year rule, you can still be granted permission to buy a summer house if you are consider to have a “special connection” to Denmark.

This can take the form of close family in Denmark or professional, cultural or financial connections, or previous stays in the country. These are taken into account by the Justice Ministry when it reviews an application.

For companies, different rules apply to those for private individuals, and companies have more leeway to purchase property in Denmark.

However, companies are only allowed to buy holiday homes in Denmark for commercial purposes or to use them for year-round residence. These means rules for private individuals cannot be circumvented by purchasing the properties under a business.

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