Purchase budget: how much home can you afford?

The difference matters. If, for example, your finances can accommodate 3.000.000 kr. in new housing debt and you can put 500.000 kr. directly towards the purchase price, your indicative purchase budget may be 3.500.000 kr. before costs and the bank's overall assessment.

If, on the other hand, you have existing debt, or your disposable income (rådighedsbeløb) becomes too low for the specific home, the budget may be smaller.

In brief

• The purchase budget is the possible price of the home, not just the size of the loan.
• The debt-to-income ratio (gældsfaktor) gives a benchmark for total debt relative to annual income before tax.
• Existing debt uses up part of the room for debt before the new housing debt is calculated.
• Your own money can raise the purchase price, but only the part that is actually spent on the purchase price.
• Money for land registration (tinglysning), other purchase costs and the buffer you want to keep must not be counted twice.
• Disposable income can set a lower ceiling than the debt-to-income ratio.
• The bank must carry out a specific creditworthiness assessment (kreditværdighedsvurdering) and may only enter into a home loan agreement if the assessment shows it is likely that the borrower can meet its terms.^[1]

What is a purchase budget?

A purchase budget is the highest home price that can add up with:

• The debt your finances can carry
• The money of your own you put towards the purchase price
• Your disposable income after the purchase
• The home's running costs
• Down payment (udbetaling) and purchase costs
• The bank's assessment of income, debt, net worth (formue) and risk

It is therefore misleading to define the purchase budget as the maximum amount you can borrow.

If you have plenty of your own money, you can buy for more than your loan amount. Conversely, if your monthly finances are under pressure, you may get a lower purchase budget, even though a simple debt calculation shows a higher figure. Once you know your purchase budget, you can compare it with prices per square metre in each municipality (in Danish).

Debt ceiling, home loans and purchase price are three different figures

The terms are often mixed up.

The debt ceiling

The debt ceiling is an indicative estimate of how much total debt your finances can accommodate. It can, for example, be calculated from the household's income and a chosen debt-to-income ratio.

It is not a loan commitment (lånetilsagn).

The new housing debt

The new housing debt is the part of the debt ceiling that is left once existing debt has been included.

If you have student debt, a car loan or other debt, it counts towards your total debt. It can therefore reduce the room for new home loans (boliglån).

The purchase price

The purchase price is the amount you pay for the home.

It can be financed with a combination of:

• Mortgage loan (realkreditlån)
• Bank loan
• Your own money
• Any other financing that the bank knows about and includes

The purchase price can therefore be higher than the new housing debt, because your own money is added on top.

An indicative formula for the purchase budget

As a first overview, the calculation can be set out like this:

Indicative total debt ceiling minus existing debt = possible new housing debt

Then:

Possible new housing debt + own money for the purchase price itself = indicative purchase budget

It is important to count the right share of your own money in the last line.

If you have 400.000 kr. in savings but 100.000 kr. must go on purchase costs and the buffer you want to keep, only 300.000 kr. can be added on top of the possible housing debt.

The formula is an indication. The final budget may be lower if disposable income, the home's costs, the loan-to-value ratio, LTV (belåningsgrad) or other parts of the credit assessment (kreditvurdering) set a lower ceiling.

Example: 3 million kr. in debt and 3 million kr. of your own money

Imagine the debt calculation indicates that the household can have 3.000.000 kr. in total debt.

The household has no existing debt and can put 3.000.000 kr. directly towards the home's purchase price. The money for costs and the desired buffer is kept separately.

The calculation becomes:

The indicative purchase budget is therefore 6.000.000 kr., not 3.000.000 kr.

The 3.000.000 kr. from the debt calculation describes the debt. It does not describe the whole purchase price.

The bank must still examine whether the running costs of a home costing 6.000.000 kr. fit the disposable income, and whether the financing and the home can be approved.

The role of the debt-to-income ratio in the purchase budget

The debt-to-income ratio shows total debt relative to the household's annual income before tax.

The formula is:

Total debt ÷ annual income before tax = debt-to-income ratio

If the household earns 800.000 kr. a year before tax and has 3.200.000 kr. in total debt, the debt-to-income ratio is 4.

The Danish FSA (Finanstilsynet) generally regards a debt-to-income ratio above 4 as high. This does not mean that 4 is a universal upper limit, or that everyone above 4 is automatically refused.^[2]

When a calculator uses a particular debt-to-income ratio, the result therefore shows a scenario. It does not necessarily show the bank's final limit.

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

How existing debt affects the budget

Existing debt is not deducted directly from the home's price. It is deducted from the total room for debt.

An example:

Existing debt also affects disposable income through interest and repayments (afdrag). It can therefore matter in two places:

1. It uses up part of the total debt ceiling.
2. It reduces the money left over each month.

Any supplementary financing of the down payment must also be disclosed to the bank and included in the assessment of the debt-to-income ratio and disposable income.^[2]

Your own money is more than the down payment

Your own money can consist of:

• Savings
• Proceeds (provenu) or equity (friværdi) from a home you have sold
• Securities that are sold
• A gift from family
• Other documented funds

But the whole amount cannot necessarily be added on top of the housing debt.

You need to distinguish between:

Own money for the purchase price

This is the part that directly reduces the need for loans and raises the possible purchase price.

Money for purchase costs

This can include land registration, loan costs, insurance and help from professionals. The amounts must be calculated for your specific purchase.

Money you keep after the purchase

This is your liquid buffer for moving, renovation and unexpected expenses. It is still part of your net worth, but it does not finance the purchase price if it stays in your account.

As a starting point, the bank must make sure that the buyer contributes an appropriate down payment. 5 per cent is normally used as a benchmark when buying an owner-occupied home, but the rules require a specific assessment rather than one unconditional minimum percentage in every case.^[1]

Read more in the guide on down payment for a home.

Keep purchase costs outside the purchase price

Savings of 300.000 kr. do not necessarily mean that all 300.000 kr. can be added on top of the loan.

When buying a home, there may be costs for, among other things:

• Land registration of the deed (skøde)
• Land registration of loans and mortgages
• Costs charged by the bank and the mortgage credit institution (realkreditinstitut)
• Buyer's adviser (køberrådgiver) or lawyer
• Insurance
• Technical building assistance
• Moving and the first work on the home

In 2026 the fixed fee for registering a mortgage is 1.825 kr., while the variable fee is 1,25 per cent of the secured amount. The actual cost can be affected by the option to reuse previously paid land registration fee (tinglysningsafgift).^[3]

The purchase costs therefore have to be worked out for the specific transaction.

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

Disposable income can set a lower ceiling

The debt-to-income ratio looks at debt relative to income. Disposable income looks at everyday life after all fixed expenses.

The formula is:

Income after tax minus fixed expenses = disposable income

The bank includes, among other things, the expected costs of:

• Interest and repayments
• Property taxes
• Insurance
• Electricity, water and heating
• Owners' association (ejerforening) or homeowners' association (grundejerforening)
• Transport
• Childcare and after-school care (SFO)
• Existing loans and credit facilities

How much disposable income a household needs is individual. The bank can use its own benchmarks, but must assess the specific finances.^[4]

This means a debt calculation may point to a home costing 4.000.000 kr., while the disposable income only adds up at a lower home price.

Read the full explanation in the guide on disposable income.

The specific home affects the budget

A purchase budget is not always one fixed figure that applies to every home.

Two homes at the same price can have different running costs.

House A

• Low heating consumption
• Limited maintenance
• Low property tax
• No major projects in the first few years

House B

• High heating consumption
• Roof and windows with a short remaining lifespan
• Higher property tax
• Greater transport needs

The purchase price is the same, but House B can put more strain on disposable income. The bank may therefore judge that your finances can carry one home but not the other on the same terms.

With an owner-occupied flat (ejerlejlighed), owner costs (ejerudgift), joint loans and planned projects in the owners' association can change the calculation in the same way.

Financing affects your monthly finances

The purchase budget does not depend only on the total size of the loans.

Interest rate, repayments, term and the split between mortgage loan and bank loan affect the monthly payment (ydelse). Two financing set-ups with the same debt can therefore result in different disposable incomes.

For an ordinary owner-occupied home, mortgage credit can typically finance up to 80 per cent of the home's lending value. The rest is often covered by a bank loan and your own money.

If the mortgage credit institution values the home lower than the agreed purchase price, the difference may require more bank financing or more of your own money. The agreed price alone is therefore not decisive for the financing.

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

Three purchase budget examples

The examples show the maths. They are not loan commitments.

Example 1: First-time buyer with existing debt

The budget is not 3.050.000 kr. The whole of the savings cannot be added on top when part of it is set aside for other purposes.

Example 2: Couple with large savings

The purchase price can be higher than the debt ceiling because your own money finances part of the home.

Example 3: The debt-to-income ratio leaves room, but everyday finances do not

Here it is not the debt-to-income ratio that sets the ceiling. It is disposable income and the costs of the specific home.

How to read the bank's purchase budget

When the bank gives you an amount, it is worth looking at what the amount is based on.

This can include:

• How large a down payment has been factored in
• Whether purchase costs have been deducted from savings
• Which existing debt has been included
• Which interest rate and loan type the budget is based on
• Which housing costs the bank has assumed
• Whether the amount applies to a house, an owner-occupied flat or both
• How much buffer is left after the purchase
• Whether the budget is a preliminary estimate or an actual approval

A purchase budget can therefore change when the bank has a specific address, sales listing (salgsopstilling) and financing to calculate with.

See how the figures fit together in the guide on the four pillars of home finances.

Common mistakes in the calculation

You confuse the debt ceiling with the purchase price

This overlooks the money of your own that can be put directly into the home.

You add all your savings on top of the loan

This overlooks purchase costs and the buffer that is not spent on the purchase price.

You forget existing debt

Student debt, car loans and other loans count towards total debt and can also reduce disposable income.

You treat a debt-to-income ratio of 4 as a guarantee

A particular ratio is a calculation scenario. The bank makes an overall assessment and may arrive at a different debt ceiling.

You use one budget for every home

Running costs, maintenance, transport and owner costs can change disposable income from one home to the next.

You count a financed down payment as your own money

A private loan or other credit is still debt. The bank must know about the financing and include it.

You assume one fixed percentage for all costs

Land registration, loan costs and other expenses depend on the price, the financing and the specific transaction.

Information for your first budget

An indicative purchase budget becomes more useful when you have the following information:

1. The household's annual income before tax
2. The household's income after tax
3. Balance on all existing debt
4. Monthly interest and repayments on the debt
5. Savings and other documented funds
6. The amount to be set aside for costs
7. The buffer you want to keep
8. The household's other fixed expenses
9. An estimate of the costs for the type of home you are looking for

The bank may ask for further documentation and uses its own assumptions in the final assessment.

In summary

Your purchase budget starts with the debt ceiling, but your own money, debt and buffer move the figure.

The debt calculation shows a possible ceiling for total debt. Existing debt uses up part of that ceiling. Your own money for the purchase price is added on top of the possible new housing debt.

This gives the following order:

1. Find an indicative total debt ceiling.
2. Deduct existing debt.
3. Add the money of your own that goes directly on the purchase price.
4. Keep purchase costs and your desired buffer outside.
5. Check whether disposable income and the specific home fit your finances.

This is how 3.000.000 kr. in possible debt and 3.000.000 kr. of your own money can become an indicative purchase budget of 6.000.000 kr. and not 3.000.000 kr.

BoligKlar gives you a second pair of eyes and an overview. The bank carries out the final creditworthiness assessment and determines the financing.

Once you have found a home within your budget, you can see what the home costs per month with the loan, property taxes, maintenance and utilities.

Frequently asked questions