Principal on a home loan: why the debt can be higher than the proceeds

It is not necessarily the same amount that lands in your account or is used to pay for the home. With mortgage loans (realkreditlån) in particular, the bond price and costs can mean that the principal is higher than the proceeds (provenu) you have available.

If, for example, you need 2.000.000 kr. and the loan is paid out at a bond price (kurs) of 95, the nominal principal must be higher than 2.000.000 kr. to produce the proceeds you need.

In brief

• The principal is the loan's nominal amount when it is set up.
• The proceeds are the amount available after bond price and costs.
• The outstanding debt (restgæld) is the amount still owed on the loan at a later point.
• With a bond-based loan below a price of 100, the principal must be higher than the proceeds you need.
• Costs are not automatically added on top of every loan. They can be paid in cash or financed in different ways.
• Principal, interest, administration margin, repayments and loan term affect the monthly payment (ydelse).
• Total debt counts towards the debt-to-income ratio (gældsfaktor). A debt-to-income ratio above 4 is generally regarded as high, but 4 is not a universal maximum.^[1]

What does principal mean?

The principal is the amount stated as the loan's nominal size when the loan is established.

If a bank loan is set up with a principal of 400.000 kr., that is the starting point for repaying the loan. If a mortgage loan is set up by issuing bonds with a nominal value of 2.100.000 kr., then 2.100.000 kr. is the loan's principal.

The principal should not be confused with:

• The price of the home
• The total financing need
• The cash proceeds
• The outstanding debt after some years of repayments
• The total amount repaid over the full loan term

These are five different figures, even though they can look similar at the start.

Principal, proceeds and outstanding debt

Here is the difference in brief:

If a loan is taken out at a price of 100 with no financed costs, the principal and proceeds can be close to each other.

If the price is below 100, or if some costs are financed, the difference can become larger.

Why can the principal be higher than the proceeds?

There are two main explanations.

The bond price is below 100

Mortgage loans are funded through bonds. The bond price is the price of the bonds.

At a price of 95, bonds with a nominal value of 100 kr. are sold for about 95 kr. before costs. If you need 100 kr. available, bonds for more than 100 kr. must therefore be issued.

Forbrug.dk likewise explains that the lower the price, the larger the loan you must take out to have the amount you need paid out.^[2]

Costs are financed

Some costs can be included in the financing. Others are paid from your savings.

If a cost is financed, the borrowing need rises. If it is paid in cash, it does not affect the principal in the same way.

It is therefore wrong to say that all fees and charges are automatically built into the principal.

Worked example at a price of 95

You need cash proceeds of 2.000.000 kr. before costs.

A simplified calculation of the nominal principal needed is:

Proceeds needed ÷ price as a decimal = principal needed

At a price of 95, the calculation is:

2.000.000 kr. ÷ 0,95 = 2.105.263 kr.

In a simplified example, the principal must therefore be about 2.105.000 kr. to produce proceeds of 2.000.000 kr. before other costs.

The difference is about 105.000 kr.

This is more precise than calculating 5 per cent of the 2.000.000 kr. and adding that amount on top. The principal itself has to be large enough that 95 per cent of it gives the proceeds you need.

In an actual offer, rounding, brokerage fees (kurtage), price spread (kursskæring) and other items can change the amount.

Which costs can affect the calculation?

When setting up home financing, costs can include:

• Land registration fee for the mortgage (tinglysningsafgift for pant)
• The bank's set-up fees
• The mortgage credit institution's (realkreditinstitut) fees
• Brokerage fees
• Price spread
• Fee for a fixed-price agreement (fastkursaftale)
• Costs for guarantees and processing

Some items are paid directly. Others can, by agreement, be included in the financing need.

It is therefore useful to find three lines in the loan offer:

1. The loan's principal
2. The expected proceeds
3. The costs that have been deducted or financed

Read the full overview in the guide on what it costs to buy a house.

Land registration fee for a mortgage in 2026

When a loan is secured by a mortgage on real property, a land registration fee (tinglysningsafgift) is payable.

From 1 January 2026, the fee generally consists of:

• A fixed fee of 1.825 kr.
• A variable fee of 1,25 per cent of the secured amount

The variable rate was lowered from 1,45 per cent to 1,25 per cent in 2026.^[3]

The actual cost can be lower if land registration fee you have already paid can be reused. It should therefore not always be calculated as 1,25 per cent of the whole new loan.

The land registration fee on the deed (skøde) is a different fee and should not be confused with the mortgage registration fee (pantafgift).

Principal on mortgage loans and bank loans

Mortgage loans

With a bond-based mortgage loan, the bond price can create a difference between principal and proceeds. The administration margin (bidragssats) and costs also affect the total price, but are not necessarily part of the principal itself.

Bank loans

A bank loan (banklån) is often paid out closer to a price of 100. The principal and the amount paid out can therefore be more alike.

There can still be set-up costs. Whether they are paid in cash or financed depends on the offer.

Read more about the difference between mortgage loans and bank loans.

How does the principal affect the debt-to-income ratio?

The debt-to-income ratio compares the household's total debt with its annual income before tax.

If you have:

• A mortgage loan with outstanding debt of 2.105.000 kr.
• A bank loan of 300.000 kr.
• Student debt of 95.000 kr.

your total debt is 2.500.000 kr.

The relevant figure is your actual total debt. Not just the cash proceeds you received from the mortgage loan.

A higher nominal principal can therefore increase your total debt and with it your debt-to-income ratio.

Read the full explanation in the guide on debt-to-income ratio when buying a home.

How does the principal affect the monthly payment?

Interest and any repayments are calculated on the basis of the debt and repayment schedule set out in the loan.

The monthly payment depends on factors such as:

• Principal
• Interest rate
• Administration margin
• Loan term
• Repayment profile
• Payment dates

A loan with an interest-only period (afdragsfrihed) has a different monthly payment from a loan with repayments (afdrag), even if the principal is the same.

A loan with a variable rate can have a different monthly payment later on. A fixed-rate loan has a fixed bond interest rate, but the administration margin and certain fees can change according to the terms.

The principal alone therefore cannot be used to compare monthly outgoings.

Principal and outstanding debt over time

The principal is the starting point. The outstanding debt changes over the life of the loan.

With repayments, the outstanding debt normally falls steadily. With an interest-only period, it does not fall in the same way during that period.

At the same time, the bond price can affect what it costs to redeem a bond-based loan. The nominal outstanding debt and the current redemption amount are therefore not always identical.

When you compare loans, you can look at the outstanding debt after, for example, 5 and 10 years. This shows how much debt is expected to remain if the offers' assumptions hold.

Can a fixed-rate loan always be redeemed at a price of 100?

Fixed-rate callable mortgage loans can normally be terminated for a payment date and redeemed at a price of 100, according to the loan's terms and notice periods.

They can often also be redeemed by buying the underlying bonds at the market price. If the price is below 100, this method can be cheaper than redeeming at 100. If the price is above 100, redeeming at 100 on a payment date can be relevant.

This does not mean the loan can be redeemed at a price of 100 at any time without notice or costs.

The redemption method, date, fees and any interest differential (differencerente) should be set out in the specific offer and a redemption calculation.

What does price hedging mean?

The bond price can change between the loan offer and the payout.

A fixed-price agreement locks the price for an agreed payout date. Boligejer.dk explains that price hedging (kurssikring) locks the price at which the loan will later be paid out.^[4]

The agreement has a price. Without price hedging, the principal or proceeds can change if the bond price moves.

Price hedging is therefore not just a matter of guessing where interest rates will go. It is also a question of how precisely you need to know the financing need before the payout.

How to read the principal in a loan offer

Find this information:

Since 2021, home loan offers must come with a simple loan overview (simpelt låneoverblik) that highlights key information such as principal, price hedging, borrowing rate and administration margin.^[5]

Read the documents together. The simple overview does not replace the full terms.

Common misunderstandings about principal

The principal is always higher than the proceeds

No. At a price of 100 and with no financed costs, the figures can be close to each other. On some loans, the relationship can look different.

All costs are automatically added to the debt

No. Some costs are paid in cash, while others can be financed. It depends on the agreement.

A price of 95 means exactly 5 per cent extra debt

Not quite. To get a specific amount of proceeds, you divide by 0,95 to find the principal. The difference is therefore slightly more than 5 per cent of the proceeds.

A price close to 100 is always the best choice

No. The price is linked to interest rate, monthly payment, outstanding debt and redemption options. One figure cannot decide the whole choice.

The principal is the same as the price of the home

No. The purchase price is typically financed with several loans and your own money.

A debt-to-income ratio of 4 is a fixed maximum

No. A debt-to-income ratio above 4 is generally regarded as high, but the bank makes an overall assessment.

Fixed-rate loans can always be redeemed free of charge at a price of 100

No. Payment dates, deadlines and costs apply according to the loan's terms.

Summary

The principal tells you how large the loan is in nominal terms. The proceeds tell you how much money is made available. The outstanding debt tells you how much you owe later on.

With a bond-based loan below a price of 100, the principal can be higher than the proceeds. Costs can widen the gap if they are financed.

The most important calculation is therefore not only:

How much am I borrowing?

It is also:

How large will the principal be, how large will the proceeds be, and what is the outstanding debt after a few years?

See how to read the rest of the figures in the guide to your loan offer. You can work out what the loan costs each month in the monthly payment calculator. You can work out what the loan costs each month in the monthly payment calculator.

BoligKlar gives you a second pair of eyes and an overview. The bank and the mortgage credit institution set the specific loan terms.

Frequently asked questions