Update: September 2, 2020
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!
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.
My previous home purchasing experience is pretty limited. I bought a condo in 2005 in California, and that was definitely a learning experience. I never thought I would fill in so many forms, attend so many meetings, sign so many papers, read so many contracts, and pay so much money. But I did, and it taught me a lot about the importance of contracts and floor plans. Naturally, I had the same expectations when I started thinking about buying my apartment in Stockholm.
I went to the bank first to see who would give me a mortgage, and how much they’d grant me. I was shocked at how easy the process was. All they wanted to know was how much money I earned each month, and what expenses I had. I didn’t need to send in my last 2 pay stubs, provide my last 3 annual income tax returns, or anything. It was so easy. It’s also really easy to shop for the best mortgage rate. You just go to each bank and ask them to give you the best offer, assuming you transfer all of your business over to them. Don’t be afraid to be pushy – it’s their job to impress you with a good offer. That’s what they are most interested in – making sure your monthly direct deposit goes to them and that you begin a savings account at their bank. That’s about it.
Then you get to the actual bidding process. The Swedes are a technologically-savvy bunch. First of all, there is ONE site everyone visits when they look for apartment postings. Not a million separate listing sites. Secondly, you can submit bids online or via SMS. How smart is that?
The second surprise comes when you close the deal. It took me a grand total of 7 days to buy my apartment, from the viewing date until I signed the purchase agreement. The purchase agreement was a total of 4 pages. That was it!
There was a waiting period before the apartment was turned over to me since the seller had to wait for his new apartment. When it was time to get the keys, I went into the bank with the seller and the realtor and transferred the money over and activated my loan. That was pretty much it.
It’s been about 3 and a half years since I moved into this apartment. I am really glad I bought it since the prices in this area have done nothing but go up, so it was a smart investment.
I’ve looked back at the process and compared it against the American system and all I can say is that this is a crystal-clear example of the difference between how Swedes do business and how Americans do business. Swedes rely on the laws that are set to protect them, so their contracts don’t need to be long and complex. Thank goodness for that, since my contract was in Swedish and I couldn’t read a single word back in 2008. Americans rely on the contracts to protect them, so their contracts have to include every “if”, “and”, or “but” clause to ensure that both parties are protected. Naturally, this makes every publication a little thicker, a little more complicated, and a lot more annoying.
Truly Swedish? I think so.
If you are looking for an apartment, here are some resources:
http://www.hemnet.se — the authoritative home listing site
http://www.maklarstatistik.se — a good site to track selling price trends in each area
http://www.seb.se — a good bank
http://www.danskebank.se — the bank I had my first loan with
http://www.nordea.se — the bank that I have now