We are getting a lot of emails from people in Sweden looking to buy property abroad. We have therefore decided to create a page were we answer some of the most common questions that we get from our Swedish clients. This information is specific to people who live in Sweden and are looking to find finance their property purchase. The information on this page is not going to be correct for you if you do not live in Sweden.
How to finance the down payment?
If you are looking to borrow money for your down payment you can use an unsecured loan. These loans are called “privatlån” in Swedish. All the major banks offer this type of loan. So do a large selection of other lenders. How much money you can borrow depends on what lender you use. Most companies allow you to borrow a maximum of between 300 000 and 500 000 SEK. To be allowed to borrow a lot of money you need a good economy and a high wage. The bank will choose whether to approve your loan or not based on your wages the previous. You will not be allowed to borrow a large amount if you have a poor credit record.
I recommend that you use a website such as kreditguiden.se that allow you to compare different loans to find the cheapest alternative available to you.
What is the best way to finance my property?
The best option has traditionally been to use your home as security for your loan. This has been a very cheap way to finance your purchase without significantly increasing your monthly cost. The new Swedish regulations that force you to pay down your mortgage with 1-2% a year have made using your home as security less favorable.
The new rules have made it more expensive to borrow money using your home as a security. Or rather, it will increase your monthly payment since you will have to pay down your mortgage faster than you had to before the rule change. The money that is used to pay down the loan is not really an expense but rather a forced savings. It is therefore not technically more expensive but it will force you to pay a larger payment each month.
Using your house as security remains that best alternative for most Swedish buyers. The one exception from this rule is if you qualify for “Superlånet” offer by Avanza. You can read more about this loan below. “Superlånet” can be cheaper than an increased mortgage.
How do I use my stock as security to borrow money?
Numerous banks and financial institutes allow you to use stock as security for a loan. We do however strongly recommend that you use Avanza if you want to use your stock as security. They offer a very cheap loan called “superlånet” that allows you to withdraw the money and use it for whatever you want. If you move your stock to Avanza you will be able to use their cheap brokerage as well as their beneficial loan. Avanza allow you to borrow money to an interest rate below 2%.
The security value of your stock depends on what stock you own. Large Cap companies tend to have the highest security value but the best way to find out the security value of your portfolio is to look up the value of each stock at Avanza. If your already use Avanza you can see the security value of your portfolio already calculated in your account.
I recommend that you borrow less money than you technically could to have a cushion so that you do not need to provide additional security if the market goes down. This reduce the risk of a forced sell of to cover your debt.