Buying a house for beginners: what to watch out for

Know your number before you fall in love with a house

The first thing to watch out for when buying a house is your own number, not the house's. The bank looks at four things: disposable income (rådighedsbeløb), debt-to-income ratio (gældsfaktor), down payment (udbetaling) and net worth (formue). If you know those four figures, you know which price range you can realistically buy in. And it is not only the debt-to-income ratio that decides it. Often it is the disposable income that holds you back. Many people do it the other way round. They find the house first, and then the bank meeting becomes a disappointment instead of a confirmation.

The second is how much cash you need. Think of it as the house and the extras: the house is the price, and the extras are everything that comes on top. You must put down at least 5 per cent of the purchase price yourself as a down payment, and then come land registration (tinglysning), a lawyer, perhaps a building surveyor (byggesagkyndig) and change-of-ownership insurance (ejerskifteforsikring). Count all the extras before you bid, so your savings are not used up before the keys are yours.

Read the condition report as a buyer, not as a seller

The condition report (tilstandsrapport) describes the house's visible damage using grades, and the electrical installation report (elinstallationsrapport) does the same for the electrics. Both are ordered by the seller, so that the seller can be released from liability for hidden defects for ten years. That means you should read them as the person who takes over the bill. Every remark is something that becomes yours.

Pay particular attention to the roof, damp in the basement and crawl space, windows and sloping floors. The report only covers what the building surveyor could see on the day. It says nothing about drains, hidden pipes or how many years the boiler has left.

We actually did not use a building surveyor ourselves when we bought our last home. But we had to renovate several of the things that had been flagged as problematic, including a couple of cracked roof sheets, which we had replaced at the same time as we removed an old wood-burning stove. So read the report twice, and ask about everything you do not understand.

The energy label and heating cost you every month

The energy label (energimærke) runs from A to G and tells you how much energy the house uses for heating and hot water. A house rated E or F can have a heating bill several thousand kroner higher than a house rated B. Every month, for years. That is money that has to come out of your disposable income before there is room for anything else.

Ask about the heat source. Oil boilers, older gas boilers and electric heating are expensive to run, and an oil boiler can mean a buried oil tank that you become responsible for. District heating and heat pumps are usually cheaper, but check that district heating is actually available on the road before you count on it. Ask for the latest heating bill. It does not lie.

The plot, the local plan and the neighbours

When you buy a house, you also buy the plot. Check on tinglysning.dk whether there are easements (servitutter) that limit what you may build or change. Read the municipality's local plan (lokalplan) for the area. It can prohibit an extension, a carport or a particular type of roof, and it can allow the neighbour to build something you had not expected.

Visit the road at different times. A quiet residential road on a Saturday morning can be a commuter route on a Monday morning. Talk to the neighbours if you can. They know whether the basement floods every autumn and whether there are plans for new building behind the hedge. That is not in any report.

If you are buying a flat instead

If you buy an owner-occupied flat (ejerlejlighed), you also buy a share of the building. Read the owners' association's (ejerforening) articles, accounts, budget and the minutes of the latest general meetings. They show whether renovations are planned that you will end up paying for through the common charges (fællesudgifter).

The common charges count as a fixed housing cost when the bank works out your disposable income. Ask about the roof, windows, balconies and soil stacks, because those are the big shared items. The down payment requirement is the same as for a house: at least 5 pct. of the purchase price plus transaction costs.

Conditions in the purchase agreement, and what I got wrong myself

Never sign without a lawyer condition (advokatforbehold) and a bank condition (bankforbehold). The lawyer condition gives your lawyer the right to cancel the purchase if something in the paperwork does not hold up. The bank condition makes the purchase conditional on the bank approving the financing. Both are free to ask for.

I took all the conditions out of the agreement myself, because I was afraid of losing the house. So I have certainly thought about whether it was worth it. We could only afford to do it because, from many years in banking, I already knew everything an adviser would have pointed out to us. You may not know that yet, and then the conditions are your safety net.

When we bought our house, the estate agent (ejendomsmægler) was not keen to show the house again, because he had already received three bids after the first day on the market. That does not make him an opponent. It just means you should not always take the agent's word as gospel, and that you should be prepared to ask the right questions. If the house is older, has many remarks, or you are unsure, consider your own building surveyor. It typically costs a couple of thousand kroner, and what is that compared with several million kroner?

Change-of-ownership insurance and the handover day

Once the seller has had the condition report and electrical report made, you can take out change-of-ownership insurance, and the seller pays half the premium for the basic cover on the cheapest quote. The insurance covers hidden damage that was not in the reports.

I have paid 36.000 kr. myself for insurance I may never get a single krone out of. And in our previous home we had damage covered for almost 80.000 kr., where the insurance had cost only 12.000 kr. You can be lucky, and you can be unlucky. The question is the same every time: will you regret it if you find damage that might have been covered? Read the exclusions in the quote, because there is probably something it does not cover.

On the handover day (overtagelsesdag) you read the meters together and note the figures in the settlement statement (refusionsopgørelse). Take photos of everything, and go through the house room by room before you sign that everything is as agreed. The first 14 days after the handover are your deadline for reacting to anything that is not right.

If you want to see the whole sequence, buying a home step by step shows the 12 steps from budget to keys, and who does what along the way. Also read how to read the condition report before you bid.

Buying a house is not harder, just more involved

It is no harder than buying a flat. There are just more things to keep track of, and they can be taken one at a time, in the order they come up. My role is to tell you what to look for, and why. The decision is always yours.

Frequently asked questions