How should I get a new mortgage?

Hi everyone!

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.

I keep all of my savings in a kapitalförsäkring* (KF) at Nordnet which is a pension insurance that you save into. Most of the big banks charge fees for having this sort of account and have restrictions for when you’re able to withdraw the money, but otherwise, it’s comparable to the investeringssparkkonto, one of the most popular savings vehicle in Sweden. Both types of these accounts have incredibly advantageous tax rates which means that if you are a lucky trader and make an incredible amount of money on your investments, you won’t get taxed nearly as much as if you were investing in a normal brokerage account.

Which banks did I consider?

I talked to SEB, Nordea, and Swedbank and I got rates ranging from 1.16% to 1.40%. All of them, except for SEB (since I was already a customer with them) wanted me to move all of my existing savings to them. That would mean putting my investments in their versions of a KF, all with different fee requirements and withdrawal restrictions.

I also looked at Avanza, Nordnet, and Skandiabanken which are some of the smaller players on the market. Avanza has great rates but doesn’t accept customers who are required to file taxes in the US due to non-compliance with FATCA requirements. Skandiabanken has a website that allows you to change different parameters and see what kind of interest rate you’d get. Their rates looked okay but the rates weren’t nearly as competitive as I was hoping.

Finally, I looked at Nordnet. They recently declared their intent to enter and change the mortgage market so they’ve started offering extremely competitive rates which are solely based on how much money you save with them. The discount you get off their list interest rate varies between 1.79% (their list rate) all the way down to 0.69%. My KF is with Nordnet and I have an automatic monthly savings plan. Nordnet does not have restrictions on withdrawals and is free to have, and you can buy mutual funds, ETFs, or stocks. Not bad, right?  Considering that I already have most of my savings with Nordnet and was planning to continue saving with them, I decided to go with them.

What did the process look like?

You have to first apply for the loan, so I filled out some paperwork and told them a little about my apartment and how much I wanted to borrow. They approved me about a week later and sent me some more paperwork to sign. Part of this process includes the bank contacting the Bostadsrättsförening to get a lägenhetsförteckning – basically a copy of the association’s apartment register with basic information about the apartment. This process can take a long time but my association was really good about sending the paperwork back to Nordnet within a business day.

The association also takes this opportunity to update the lägenhetsförteckning with the new bank (Nordnet). Most associations will take a small fee for this, the pantsättningsavgift.

After getting the paperwork from my association, Nordnet contacted SEB, obtained the payoff amount, and paid it on my behalf. SEB will send a notification to my association to let them know that the loan is now paid off so only Nordnet will have a claim to my apartment.

Can you help me with this process?

Sure – just contact me or leave a comment and I’ll try to help you as much as I can.

*Why did I choose a Kapitalförsäkring (KF) over an Investeringssparkkonto (ISK)?

My tax advisors have recommended that I stay away from the ISK because I file taxes in the US. Due to PFIC rules, you have to disclose a lot of information about the holdings you have in an ISK, and it can trigger tax consequences every year. A KF, since it’s an insurance product, isn’t the same, so there is no tax filing requirement. This is my situation and yours may be different, so be sure to consult with your tax attorneys.

 

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