Time to share my perspective on another experience that differs quite a lot between the US and Sweden – buying a car! I’m sure most of you have personally, or through a family, experienced the car purchasing process in the US and how painful it can be. You never feel like you’re getting a good deal because it almost always feel like an adversarial negotiation.
I remember the very first car I bought in the US: the redesigned 2004 Acura TL. It was a new model year and in such high demand that dealers were able to move them quickly at MSRP. I went to 2 or 3 Acura dealerships in NorCal to get a sense of the pricing and realized that if I was able to get it under MSRP, it’d be a good deal. If I recall correctly, I ended up paying $1000 over invoice and got a few things thrown in (mud guards, winter mats) so it turned out to be an okay deal. But just the same, the entire process was harrowing and I didn’t feel like I was going to come out of the process intact.
Let’s fast forward to 2020 in Sweden. My wife and I moved into a newly constructed apartment complex and one of the features was that it had a garage for the vast majority of its residents. We decided to put ourselves on the list for a spot. We didn’t have a car when we moved in, but my in-laws were kind enough to let us borrow their Mercedes station wagon so we could run errands (read: IKEA runs) during the first few months of the move.
During these COVID-19 times, you would have expected housing prices to drop like it’s doing in major metropolitan areas in the US. But oddly enough, it hasn’t. Granted, the realtors are probably taking more precautions during viewings which means that less people are at the viewings (and therefore fewer potential bidders), but it doesn’t mean that people aren’t buying. They certainly are.
The process to buy and sell apartments is still as easy as used to be – people check out Hemnet or visit their local realtor’s website to see what’s out there. However, one significant difference is how the banks are responding. Finansinspektionen, the financial supervisory authority, is giving banks the possibility to grant exemptions to the amortization requirement.
What’s the amortization requirement? Well, there are three contributing factors, and each factor requires the borrower to lower their principal by 1%, for a maximum of 3%.
The amount of your loan is over 50% of the property’s value;
The amount of your loan is over 70% of the property’s value; and
The amount of your loan is more than 4.5x your total annual income.
It’s quite easy to trigger these depending on your personal circumstances, and with each percent means an increased monthly payment. However, with this new ruling, borrowers can apply for the exemption and banks will decide based on your income and ability to pay. I haven’t heard of any banks rejecting any requests, but at the same time, if you have the ability to pay, you really should amortize – it’s a form of savings!
Another thing I thought I’d throw into this update: interest rates. Assuming you are a low-risk borrower, you should be able to, with relative ease, get a loan between 1.15% and 1.30%. If you move your savings into the bank and save monthly with them, you might be able to get it closer to 1%. If you’re paying more than that, GO BACK TO YOUR BANK AND RENEGOTIATE!
Thanks for stopping by and read on below for the original article.
Update: August 1, 2013
Seeing as this is one of my most popular posts, I thought I’d do an update for my readers. The living situation in Stockholm hasn’t really changed since this post: a) it’s still very difficult to find a place to rent, and b) prices to buy are still high if you want to live in the city center.
However, a few things have changed around loan costs and the structure of loans. Interest rates have dropped a lot, and people are using the lower rates as an excuse to go into their banks to renegotiate their loans.
Banks are also reducing the amount of money you can borrow – now you can borrow a maximum of 75%, which means you need to have enough cash on hand for the down payment (“handpenning”). For new college grads, new couples, etc – that is a really high barrier to entry.
One thing I’ve started to see more and more – or maybe it’s just that my circle of friends has evolved over time – is that people are starting to room together with a friend. I always thought Swedes were against rooming together, but I guess the difficulty in finding rentals has made that a more popular option.
Are you in the market to buy? Here are some tips!
Shop around at different banks for the best loan and get yourself a lånelöfte. The lånelöfte will give you an idea of how much you can borrow. Don’t be afraid to pit one bank’s offer against another, and go to DIFFERENT BRANCHES of the same bank. They are all different profit centers so you’d be surprised how varied the responses can be.
Many banks will require that you transfer all of your financial assets to them (e.g. direct deposit from your employer, your pensions, etc) but you just have to agree to it. Since they know it takes time to do the transfer, you can often lock down a favorable interest rate before you do the actual transfer.
If you find a property that you’re really interested in, contact the real estate agent and ask for a “förhandsvisning” – a viewing in advance. Sometimes this gets you in at the right moment, and if you can put in a bid that the seller will take, you’ll avoid a bidding war.
Location, location, location. A crummy apartment can always be fixed up. But a bad location is… well, a bad location. I’ve lived in my apartment for 5 years now and I tell you – location is KEY! The closer you are to public transportation, the better off you’ll be, and the easier it’ll be to sell your apartment when it comes time.
Pay attention to the månadsavgift – the monthly fee that you need to pay to the association (bostadsrättsförening) – and compare it against other similarly sized properties in the area. That is more or less a fixed fee every month which doesn’t go towards paying down the mortgage, so keep an eye on it.
I hope this helps. If you have any other questions, post something in the comments and I’ll respond! Happy apartment shopping!
Original post from 2011 with minor updates:
It’s been a long time since I posted a blog post. A lot has happened in the past few months, both privately and at work, so I’ve been busy. But that’s no excuse – det är dags för ett nytt inlägg!
Today we are going to talk about the Swedish real estate market and the process of getting a mortgage. It seems to be pretty relevant right now since I have many friends who are looking for a place to call their own. I also have a former colleague who will be moving to Stockholm soon, and she just went on an apartment viewing spree today. So yes, it is fresh on my mind.
Since my experience is limited to the Stockholm inner city, take everything I say with a grain of salt!
Apartment price trends 2018-2020
I bought an apartment in Stockholm in the spring of 2008. I found an apartment in Östermalm that fit my taste and was in the bidding process. I was the only bidder, and I put forth an offer of 2,700,000 SEK. The seller countered with 2,800,000 SEK and we split the difference at 2,750,000 SEK. That’s about $320,000 USD using the exchange rate from Sept 2020, but was closer to $460,000 USD back when I bought it. That’s a big chunk of change, even for a kid from San Francisco. Continue reading →
It’s time for a fun update! Today I’m going to talk about getting a driver’s license in Sweden (or rather, what I had to go through to get my Swedish driver’s license). Listen up, Americans… this ain’t no joke. The test is way harder than you think.
Raise your hand if you moved here and found out that your driver’s license was only good for the first year that you were here? I’ve always thought that was weird – as if we would suddenly forget how to drive once the 366th day comes rolling around.
Keep your hand raised if you thought that it was no big deal for you to get a new license because you drove back in your home country, or you chose to postpone the process because you didn’t think you would need a car.
As soon as it became clear that the outbreak wasn’t under control, we received a note from our head of HR that everyone would be working from home, globally, starting on March 11. It was pretty sudden – none of us had prepared for this so most of us left things in the office that we would have taken home had we known (keyboard, mice, monitors, etc).
There are a million posts on Facebook and other social media on what it is to work from home so I won’t talk so much about work – but I did want to share some perspectives from my personal life now that both my wife and I are stuck in a WFH situation.
Here in Sweden, the non-meat burger patties are just starting to catch on. Recently, Burger King and Max, two of the fast-food chains in Sweden, announced that they were hopping on the bandwagon and releasing burgers made with non-meat patties. Last week, while I was on a business trip, I had an opportunity to eat a burger made with Beyond Meat’s patty. It was actually really good – the consistency was similar to meat, it was juicy, and the taste was incredible. Despite that, because I ordered a non-meat burger, I knew it was non-meat so I kept trying to find reasons how I could tell that it wasn’t meat.
But what if someone just handed me a burger and told me to guess. Would I be able to tell?
So my fiancée and I were making our version of Thanksgiving dinner last night and we were constantly wiping off stuff from the counter with the Swedish version of a sponge. We got to talking about how weird it is when we go to the US to visit family and try to clean the kitchen without the Swedish “trasa” – it just doesn’t feel right to use a sponge or a wet stinky dish cloth. Even others have experienced this problem!
Happy Thanksgiving! How are you celebrating your Thanksgivings in Sweden this year?
Last year, I lamented over the fact that Thanksgiving in Sweden, or probably anywhere away from your family, just isn’t the same as back home in the US, especially since no one else in Sweden celebrates. This year’s the same so I was ready to forego it completely, but my lovely fiancée insisted that we do something to celebrate… and so celebrate we will!
The autumn chill has come through Stockholm and it’s gotten really cold these last few weeks, which means more time spent inside. Aside from spending time inside with friends and loved ones, another thing I do look through my financial situation and recalibrate based on my goals. Boring, right? Yes, but it can save or earn you some money with very little effort!
One big thing I recently did was to move my mortgage loan from one of the big banks — SEB — to Nordnet. I’ve had SEB for six years and it was time for me to renew my rates again.
SEB and the other banks simply won’t give you a good mortgage rate unless you’re willing to invest significant amounts of your monthly salary in one of their products. It doesn’t need to be an SEB-managed mutual fund, but obviously those are the ones they’re going to push.
(for information on buying an apartment, see this other post!)
Sorry for the delay, but the process took much longer than I expected (as with most things) – but the good news is, we sold the place in our building so I’m happy to report back with some tips and tricks for those of you thinking about selling. Note that the time lapsed had nothing to do with a difficult Stockholm market or anything – it was simply due to logistics with the holiday season.
The most important thing is to find a real estate agent that you personally feel comfortable with. Rapport with your agent is the most important thing you can invest in, and that should be highest on your priority list regardless of the commission they’re charging. Transactions will probably go relatively smoothly, but when they don’t, you want to know that the person you’ve trusted with the job of selling will go to bat for you. In addition, this agent will represent YOUR personal and legal interests as well as the legal interests’ of the buyer; there is no concept of a buy-side agent in Sweden.
I’m about to facilitate the sale of an apartment in my building on behalf of our homeowner’s association (I’m a Board member). I’m meeting with a few real estate agents/firms to evaluate their offerings and will make a recommendation to the Board. This is new for me – I’ve only ever bought property in Sweden – so if you have any questions, leave a reply and I’ll try to get the answer for everyone.
I’ll blog more about this when the process has moved along a bit…