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HOUSING

EXPLAINED: How to get the best deal on your mortgage in Sweden

Taking out a mortgage is a big commitment not only financially, but it also ties you more closely to both Sweden and anyone you're buying the property with. Here's our complete guide to understanding a Swedish mortgage.

EXPLAINED: How to get the best deal on your mortgage in Sweden
Taking that first step on the Swedish property ladder can be daunting, so here's what you need to know about mortgages in Sweden. Photo: Fredrik Sandberg/TT

How do mortgages work in Sweden?

Your mortgage is a long-term loan allowing you to buy a property – the Swedish word is bolån, literally meaning “living loan”. Because housing prices are high, it’s usual to put down a small amount of the total cost (your deposit or kontantinsats) and borrow the rest from a bank, which you pay back in agreed instalments over several years. 

In Sweden, the first step of the process is getting a lånelöfte, literally a “loan promise”. You can do this either at the start of your house-hunt or when you’ve already got a specific property in mind that you’d like to buy.

It’s a good idea to do this early on in the process, because it can make it quicker to get the loan once you actually need the money, ensuring you don’t miss out on your dream apartment since the buying process is relatively fast-paced in Sweden. However, you should already have an idea of your budget when you apply for the lender’s note, because that will influence how much the bank will agree to lend. 

If you’ve still got questions on how the rest of the house- or apartment-hunting process works, check out our guides below first:

What do I need in order to get a mortgage in Sweden?

You’ll need a Swedish personnummer and proof of stable finances in Sweden, and you’ll be subject to a credit check. This means that you’ll usually need a history of employment and paying tax in Sweden, although some banks are more lenient than others when it comes to, for example, self-employed people or recent arrivals.

If you still have Swedish student loans to pay back, this will be taken into account when calculating your mortgage, however student loans in other countries are not usually factored in.


Photo: Fredrik Sandberg/TT

The exact amount you can borrow depends on how many of you are in the household, your income(s), what kind of employment you have (permanent is more secure), your deposit amount, any other loans you have, and how much your monthly fee (avgift) will be if you’ll be buying a property that belongs to a housing association (BRF) or the size of the home if you’ll be going for a detached house.

How can I get the best rate?

Your mortgage is very likely to be your single biggest household cost, so it’s worth shopping around to make a saving. Remember, even a small decrease in terms of percentage points could add up to thousands and thousands of kronor over time.

Using price comparison tools such as Compricer or Konsumenternas is a good start. Next, call up several of the banks which seem to offer the best deals; it’s a good idea to prepare for these calls by doing some sums beforehand, comparing the different deals on the market so you can pit them against their competitor and show them you know what you’re talking about.

Members of trade unions are offered discounts at several banks, so be sure to ask about this if you’re eligible, and some banks offer discounts on mortgage interest for certain types of homes, for example energy-efficient properties.

And there may be room to negotiate a better offer than the one offered online, especially if you set up a meeting or phone call. If you’re an existing customer at one bank but they haven’t offered the most competitive rate, it’s worth seeing if they’ll match the better rates you’ve found in exchange for you taking out your loan with them.

But watch out for offers that look attractive but come with hidden costs. For example, banks usually require that you have a current account with them in order to take out a mortgage there, so look out for any requirements such as expensive cards. Don’t forget to include any extras when calculating your monthly costs with different banks.

Make sure you know exactly how long any discount or reduced rate will apply for. Why not set a calendar reminder for this date, so you’ll be ready to renegotiate once the original offer expires? Either way, make sure you renegotiate your terms regularly so you’re confident you’re still getting the best deal.


Photo: Tomas Oneborg/SvD/TT

What do I need to know about joint mortgages?

If you’re buying with a partner, you’ll likely be sharing the mortgage. Remember that two people who live together as a couple in a shared household are given the legal status of sambo (cohabiting partners) in Sweden.

This means that any property you purchase together with the intention of sharing as a couple may be subject to 50:50 division in the event of a breakup, even if one partner paid a larger share of the deposit. Some couples choose to draw up a written contract (with assistance from a lawyer) which states what would happen if they split up.

Exactly how much do I need to pay?

When you buy a house in Sweden, you’ll usually need to pay a minimum of 15 percent of the total price as a deposit (kontantinsats), so the remaining amount will be covered by the mortgage. You’ll pay back a certain amount each month over a fixed length of time, often 25 years.

If your deposit is less than 15 percent, then your mortgage will be split into two different loans, including one that covers the cost up to 15 percent of the total price which will typically have a higher interest rate and a shorter term. 


Photo: Jessica Gow/Scanpix/TT

The rest of your mortgage might be fixed rate (bunden), where the interest rate is set for a longer time of up to ten years, or it could be variable (rörlig), which means it could change as often as every three months, depending on the interest rates at the time.

A fixed rate is usually higher to begin with, but you have the stability of knowing it won’t suddenly rise if overall interest rates go up. You can also hedge your bets by splitting between the two, so that part of your mortgage is fixed rate and the other part is variable.

If you have a variable rate, it’s usually possible to overpay the mortgage. If you’re in a stable financial position with no other loans or debts, this is worth considering in order to give yourself a buffer in case your finances change in future or interest rates rise, increasing your overall total cost.

We’ve talked about ensuring your interest rates are as low as possible by shopping around, but unlike in some countries it’s not possible in Sweden to pay only the interest each year. Since 2016, there’s a law that property owners must pay off at least two percent of the total loan each year, on top of interest, until a loan reaches at least 70 percent of the value of the property, then one percent until it reaches 50 percent. That means that if you put down a 50 percent deposit, you wouldn’t need to amortise (amortera) the loan at all.

The rule that property owners have to amortise was put on hold until August 2021 due to the coronavirus crisis, but returned in September 2021.

In any case, don’t forget that in addition to your mortgage or interest rate itself, you’ll also be paying a monthly avgift (fee) to the housing association (BRF) if your apartment or house belongs to one. This is calculated separately from the mortgage as it’s a deal between you and the BRF, not you and your bank, but don’t forget to factor it in when working out the level of mortgage you can afford.

How do taxes affect this?

Here’s the good news. Property owners in Sweden are eligible for a tax deduction which means you can reclaim 30 percent of the interest payments up to a total value of 100,000 kronor per year.

You can either get this back each month, giving you extra disposable income throughout the year (this option requires you to speak to your payroll department at work) or get it returned as part of your annual tax return.

What should I keep track of in the Swedish economy?

Sweden’s central bank (the Riksbank) has increased key interest rates in recent months, meaning that banks have raised their mortgage rates to match. This means that the days of low or no-interest mortgages may be a thing of the past.

Essentially, you will have to decide whether you are comfortable paying a variable rate, which could continue to rise, or a fixed long-term interest rate, which will fix interest at the level it is now, thereby protecting you against further unexpected rises in interest rates. However, if interest rates go down in the future, your fixed rate will stay the same.

Expert economists tend to advise against opting for a fixed interest rate on your mortgage, since a variable rate means you can take advantage of a competitive market, but it’s really a matter of preference.


Photo: Aline Lessner/imagebank.sweden.se

If you’re unsure about the best option for you, it could be worth speaking to a consumer adviser. And before you take out a mortgage, you should do some calculations to ensure you’d still be able to pay off the mortgage even if interest rates were to rise further. It’s possible to do this by playing around on an online mortgage calculator, or speaking to your bank if you’re confused.

As well as following developments in the Swedish economy, it’s just as important to keep up to date with any changes to the financial state of your BRF. Most BRFs have loans themselves, which are typically higher for more recently built apartments, and the higher the loan, the more vulnerable the BRF is to national changes in the interest rate. 

If the BRF is doing well financially (bringing in plenty of money from the avgift to cover its costs), your avgift should stay relatively low and you may even be given some months’ free rent. But if the BRF starts to struggle (for example, if costly renovations are required) your avgift could go up.

This is completely separate from your mortgage, since that’s a repayment plan directly between you and your bank, but it does affect your total monthly housing costs.

Did you find this useful? Do you have more questions? Let us know.

Member comments

  1. Any more information on deposits less than 15 %? I went to my bank last week to ask and they told me 15 % is required. Are any other banks different?

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For members

ECONOMY

EXPLAINED: What can foreigners in Sweden do about the weak krona?

The Swedish Krona last week hit a record low against the dollar, hammering the international buying power of anyone earning their salaries or holding assets in the currency. We asked Johan Löf at Handelsbanken what they can do.

EXPLAINED: What can foreigners in Sweden do about the weak krona?

How low is the krona right now? 

On Tuesday, September 27th, the krona to dollar exchange rate hit an all-time-low of 11.37, easily beating the previous record low for the currency of 11.04, which it reached at the nadir of the dot com bust back in 2001. At the time of the financial crisis in 2008, a dollar would have got you less than 6 kronor, meaning the currency has almost halved in value in less than 15 years. 

A euro now gets you 10.9 kronor, which is not quite a record, with it briefly topping 11.4 in 2009, but more than it has been for most of the past decade. 

The only major currency which is more or less stable against the krona is the pound, which will now buy about 12.39 kronor, down from 13 in February, but above the levels of around 10.5 the pound hit shortly after the UK voted to leave the European Union. 

Why is the krona worth so little? 

Johan Löf, the head of forecasting at the Handelsbanken bank, told The Local, that the krona always tended to take a hit at times of financial uncertainty. 

“The krona is a relatively small currency much like the Swedish economy is a relatively small economy,” he said. “You could compare it to a small boat sailing the big ocean, so when you don’t go on the course that you thought you were going, it can be a bit of a shaky ride,” he said.

“Right now with financial market conditions being volatile, with a lot of uncertainty and risks, the Swedish krona takes a hit. Investors and various agents of the economy don’t want to hold so much of this smaller currency. Instead, they they go to safe havens like the US dollar.

“So even though there are fundamentals that would suggest that the Swedish kroner will strengthen again over time, for the time being and for some foreseeable future, we think that the krona will remain quite weak.”

How are foreigners living in Sweden affected? 

It very much depends on their individual financial situation: which currency they earn their salary in, which currency they hold assets in, and which currencies they have the highest outgoings in. 

People who live and earn in Sweden, but travel regularly to countries with stronger currencies, or perhaps send remittances back to family at home, are likely be negatively affected, Löf said. 

“It makes you lose purchasing power in these other countries: you get fewer goods and less services for the money that you have in the Swedish currency.”

It’s a similar situation for people or small businesses based in Sweden, who need to, or perhaps only want to, buy goods outside of Sweden. 

On the other hand, for people who have substantial savings abroad in dollars or euros, this might be an opportunity to convert them into kronor for use in Sweden.  

“If you have savings abroad, and you feel the need to use some of those savings, when you then sell your foreign currency to buy Swedish kronor, then you will get more Swedish kronor,” Löf explained. 

What can foreigners living in Sweden do to lessen the impact of a weak krona? 

Change the currency in which you get paid 

The best way to protect against currency exchange shocks is to make sure that you’re paid in the same currency that you spend in, so if you live in Sweden but have a lot of your outgoings abroad, it’s an advantage to be paid in dollars or euros. 

If you’re considering getting a new job, perhaps favour international employers that can pay you in one of the major currencies, or if you work for a big international company, perhaps you can ask to be paid in a different currency. 

Get freelance or part-time work outside of Sweden

If you work as a freelancer, or have some spare time for additional work, consider getting part-time freelance gigs with companies abroad that pay in euros or dollars. The lower the krona sinks, the higher your real wage when you spend in Sweden. 

Time major spending for the best point in the market 

If you have savings in kronor and are considering, for instance, buying a holiday house abroad, it is probably worth waiting until the kronor has strengthened and the Swedish economy is back growing strongly. 

Similarly, if you have savings outside of Sweden in euros or in dollars, and have been planning on buying a property in Sweden, now might be a good time to consider doing so (although it may be worth waiting a few months until interest rate rises have been fully reflected in reduced Swedish property prices).

Get a multiple currency account 

It can be helpful to have an account in multiple currencies, such as those provided by banks such as Wise and Revolut. Keeping any cash in a combination of dollars, euros and kronor can reduce your exposure to any single currency. 

The advantage for foreigners living in Sweden is that you can set up US dollar, Euro and Pound accounts, each with their own local bank number, which you can use to receive and make payments domestically in each country. 

With the krona so low right now, it may not be a good idea to convert all your assets from krona to euros or dollars right now, as the currency is probably more likely to strengthen than weaken over the coming year.

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