Danish Mortgages

Danish Property Purchase Issues

Besides making the decision on how to fund their property purchase, potential purchasers need to be aware of the other costs involved in the transaction and the associated regulations that need to be considered.

Once a property has been chosen, it is normal practice for a survey to be arranged to check the condition of the property and to obtain agreement in principle with the mortgage bank for the value of mortgage required, before asking the vendor’s estate agent to draft ‘purchase agreements’. The purchaser’s solicitor will conduct negotiations with the estate agent on price before the purchaser and the vendor sign the contracts.

In addition, the purchaser’s solicitor will examine the agreement of sale (the skoede), the survey report and carry out local authority searches to ensure that everything is in order. Overseas buyers should be aware that restrictions on foreign ownership exist in a few areas, particularly for summer holiday homes (sommerhuse) in some coastal regions.

Danish Property Purchase Fees
The purchaser is liable for the following costs:
half the fees for final contracts, which are calculated as 0.6 percent of the property value plus €175;
lawyers’ fees, approximately €400 to €1,000, depending on the value of the property and the amount of legal work required;
legal fees associated with the mortgage, 1.5 percent of the mortgage value plus €175;
stamp duty and other costs, 0.6 percent to 1.5 percent of the property value.

The vendor would normally be expected to pay the estate agent’s fees of around 6 percent of the property’s value.

Danish Property Taxes
Owners of residential property are liable for two kinds of property tax:

Property Value Tax (Ejendomsværdiskat) : this tax is levied by the state at a rate of 1 percent per annum, with properties being valued every year. The tax only has to be paid if you live in the property yourself.

Land Tax (Grundskyld): this tax is split into two components, one of which is paid to the county council and the other to the local district council. The amount payable is set by the local district council.

One important consideration of which overseas property investors should be aware is that property sales in Denmark are exempt from capital gains tax, if the property has been owned for more than 3 years, so long as the owner is not involved in buying and selling property as a commercial business.

Summary
The costs of several types of legal fees need to be allowed for when calculating property purchase costs;
residential property owners are liable for two types of property tax (property value tax and land tax);
property sales in Denmark are exempt from capital gains tax, if the property has been held for more than 3 years.