There are many costs of buying a house that people often forget about. Buying a home is one of the biggest investments most people will make in their lifetime. While many focus solely on the cash price of the house itself, it's important to remember the other costs that come with it.
If you're not aware of these, you risk unpleasant surprises right in the middle of the joy of buying a home.
Here you can read a general overview of which expenses you should include in your budget, so you can be sure your finances stretch to cover all the costs of your new house purchase.
- What costs are involved in buying a house
- Home loans when buying a house
- Skøde (deed) costs: tinglysning (land registration) of the property's deed
- Estate agent costs when buying a house
- Costs of a condition report when buying a house
- Costs of change-of-ownership insurance when buying a house
- Costs after buying a house
- Property and home insurance
- Renovation, ongoing maintenance, and other costs
- Moving costs
- Property tax (grundskyld, land tax) and ejendomsværdiskat (property value tax)
- Get buyer advisory from Bomae
Do you need a better overview of the home-buying process? Read our guide for first-time buyers here
What costs are involved in buying a house When you're buying a house or flat, you need to budget for more than just the down payment. As a rule of thumb, you should expect the costs to be around 5-6% of the total purchase price. It can therefore be a good idea to keep the items below in mind when working out how much house you can afford:
Home loans when buying a house
Buying a house is often one of the biggest expenses a person will ever make. That's why it's not unusual for most people to borrow money from the bank when buying a home. This comes with the obligation to pay it back. In addition to the borrowed amount, you'll also pay interest on the loan, and if you have a realkreditlån (mortgage credit loan), you'll also pay a fee for the mortgage credit institution to administer the loan for you.
In addition, there can be various fees associated with your home loan, such as origination costs, kurssikring (rate lock), and administration fees. It's important to understand all the costs and compare different loans to find the best deal.
For many, this will be the largest item in the budget when it comes to the costs of buying a house, and the size of the payment depends on the agreement you've made with the bank or mortgage credit institution.
Skøde (deed) costs: tinglysning (land registration) of the property's deed
When you buy a property, you need to register the skøde (deed) and any mortgage deeds in the property's land register through tinglysning (land registration). The deed is a mandatory document in every property transaction, as it's the official proof that the property has been transferred to a new owner – i.e. you, the buyer. When the deed is registered, you're recorded and published as the new owner of the property.
Registering the deed requires, among other things, a registration fee. The fee is calculated based on the property's price and the size of the mortgage deeds to be registered. The fee for registering the deed is 0.6% of the property's price, while the fee for registering a mortgage deed is 1.5% of the mortgage deed's size. If several mortgage deeds are to be registered at the same time, the fee is calculated based on the sum of the total mortgage deeds.
The Danish Land Registration Court's (Tinglysningsretten) website.
The land registration fee increased on 1 March 2020 to 1,750 kr. If the deed isn't drawn up correctly, you risk losing more money – so it can be a good idea to get legal advice involved in the process.
Read more about drawing up deeds and land registration here
Estate agent costs when buying a house If you use an estate agent to sell or buy a property, you'll need to pay a fee to the agent. The fee can vary depending on the agent's pricing structure, but it's typically a percentage of the sale price or purchase price.
It's important to remember that the estate agent's fee is an expense for you as the buyer or seller, and that it can therefore affect the final price of the property. It's a good idea to negotiate the size of the fee with the estate agent and try to reach the best possible agreement.
When negotiating with the estate agent, it's important to remember that the estate agent also needs to earn money from the sale. It's therefore important to have realistic expectations about how much you can save on the fee.
Costs of a condition report when buying a house
A tilstandsrapport (condition report) is a report that describes the condition of the property and any damage or defects. The condition report can be an important source of information for the buyer in connection with a property transaction.
The cost of a condition report varies depending on the size and complexity of the property, as well as the choice of report provider. Generally, the cost can run into a couple of thousand kroner.
Although the cost of a condition report can be an additional expense when buying a house, it can be a good investment for the buyer. A condition report can give the buyer a better understanding of the property's condition and any future maintenance and repair costs.
It's important to remember that a condition report doesn't necessarily cover every aspect of the property's condition, and that the report can't replace a thorough inspection of the property. It's therefore a good idea to seek advice from an estate agent or a lawyer if there are questions or concerns about the property.
Finally, it's important to note that a condition report isn't the same as a change-of-ownership insurance. A condition report provides information about the property's condition at the time of purchase, while a change-of-ownership insurance covers hidden defects and deficiencies that the buyer wasn't aware of at the time of purchase.
Costs of change-of-ownership insurance when buying a house
An ejerskifteforsikring (change-of-ownership insurance) is an insurance that covers the buyer of a property against hidden defects and deficiencies in the property. The insurance can only be taken out in connection with a property transaction, and it's the seller who pays the premium for the insurance.
If a hidden defect or deficiency is discovered in the property after the transaction has been completed, the buyer can make use of the change-of-ownership insurance. The insurance typically covers the costs of remedying the defect or deficiency, and it can be a great help to the buyer if unexpected expenses arise in connection with the property transaction.
The cost of change-of-ownership insurance varies depending on the size and value of the property, but it can be a good idea to look into different insurance companies' offers and prices before choosing an insurance. It's also important to read the terms of the insurance carefully and make sure you understand what's covered and not covered by the insurance.
It's important to note that a change-of-ownership insurance isn't a substitute for a condition report or an inspection of the property. Likewise, it's important to remember that a change-of-ownership insurance only covers hidden defects and deficiencies that the buyer wasn't aware of at the time of purchase. It's therefore important to inspect the property thoroughly before the transaction and make sure there are no visible defects or deficiencies that could be a source of problems later on.
Costs after buying a house When you buy a house, there are costs not only associated with the purchase itself, but also costs after buying a house. These costs can be both predictable and unpredictable, and can affect your total expenses of owning and maintaining a property. Examples of these costs can be:
Property and home insurance
If you borrow money from the bank for your new home, the bank or mortgage credit institution will require you to take out a brandforsikring (fire insurance). The reason for this is that your home serves as collateral for the loan.
If you live in a flat (ejerlejlighed), you don't need to take out your own fire insurance, as the owners' association will take out a joint insurance for the entire property. You contribute to the joint insurance through your contribution to the owners' association.
The price of home insurance depends on a number of things. Both where you live and your excess (deductible), as well as any add-ons, affect how much you'll pay. In many cases, it amounts to a couple of thousand kroner a year. You should also consider the change-of-ownership insurance, which isn't mandatory. Here, however, you're better protected in case the buyer or seller withdraws from the purchase agreement at the last minute – or if there are hidden defects in the property that you only discover after moving in. Unlike home insurance, the change-of-ownership insurance is a one-off payment.
Renovation, ongoing maintenance, and other costs
When you buy a house, there can be expenses associated with renovation, both inside and outside, if the property isn't in optimal condition. If you live in a flat, on the other hand, outdoor maintenance is handled through the owners' association. However, you're responsible for indoor maintenance in the flat yourself.
Renovating a house can involve everything from minor tasks such as painting and wallpapering to bigger renovations such as replacing the roof, windows, or plumbing installations. These costs can therefore vary depending on the scope of the renovation and the property's current condition. Likewise, renovation costs can also vary depending on whether you do the work yourself or hire professional tradespeople.
It's important to factor in potential renovation costs when assessing the price of a property. It can be a good idea to have an estate agent or a building surveyor assess the property's condition before deciding to buy.
It can also be a good idea to have a realistic plan for how you'll finance the renovation, should it be necessary. This can include setting aside money in the budget or looking into the options for taking out a loan for renovation.
Moving costs When you buy a new house, you need to think not only about the costs associated with the purchase itself, but also the costs of the actual move. There are several moving costs you need to account for, such as expenses for a moving company to transport your belongings from your old home to your new home. If you can't move into your new home right away, there can also be costs for temporary storage of your belongings.
You also need to account for the costs of disconnecting and reconnecting your utilities, such as electricity, gas, and water, as well as any costs for cleaning your old home if you need to hand it back to a landlord or seller in a cleaned condition. It's also important to account for any costs of changing your address with authorities, subscriptions, and other services that require your address information.
When moving from your old home to your new home, there can also be a period where you have to pay double rent or instalments on both your old and new home. This can happen if you can't move into your new home right away and still have to pay for your old home while waiting to move into your new one. This can have a big impact on your finances, since you'll need to be able to afford to pay for two homes at the same time for a period. It's therefore important to account for this possible cost when planning your move, and to make sure you have a financial buffer to handle this situation, should it occur.
Property tax (grundskyld, land tax) and ejendomsværdiskat (property value tax)
All homeowners are obliged to pay tax on their property and land to the state and the municipality they live in. The ejendomsværdiskat (property value tax) is paid to the state, and it's SKAT (the Danish Tax Agency) that calculates the tax and collects it via the preliminary tax assessment (forskudsopgørelse).
The grundskyld (land tax) is paid to the municipality you live in, and it's a tax on the land the home is built on. The grundskyld is set based on the value of the land, which is determined through the public property valuation.
Both taxes are paid on an ongoing basis – but you're exempt from paying the property value tax if you don't live in the property yourself.
Get buyer advisory from Bomae Are you considering buying a house? With Bomae's buyer advisory, we guide you through the entire home-buying process. Our skilled buyer's advisors are ready to help you find the right home at the right price, whether it's a house purchase, a flat purchase, or something else entirely.
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