It has become incredibly popular to be a summer homeowner in 2019. Therefore, the demand for cottage loans has also increased exponentially.
Are you looking for a loan for your upcoming cottage? In this guide, we review what you should be aware of and why you should own a holiday home at all.
Why should I borrow for a cottage?
Several holiday homes provide increased growth for Denmark, and from the citizens’ point of view there are several good reasons to lend to a holiday home. First of all, it can add tremendously to your and / or family’s quality of life. There is nothing like searching away from a busy everyday life, and here you get the opportunity to make it close to your normal home – this is also the advantage of owning a holiday home in Denmark.
You can quickly get back and forth from your primary residence. It suddenly becomes somewhat cheaper to go on vacation. At the same time, you have a lot of good opportunities to rent out your holiday home when you do not use it yourself, and thereby cover a substantial part of your holiday home costs. There are many benefits when it comes to investing in a cottage.
It is also advantageous for pensioners, as this group of people can actually be allowed to live in the cottage full time after only owning it for one year. Holiday homes are much cheaper in many parts of the country than many year-round homes, so this can also serve as a cheaper housing for many.
What type of cottage loan should I apply for?
type of cottage loan should I apply for?” />
In today’s Denmark, there are many opportunities for you who are interested in borrowing money for a holiday home or other types of housing. Overall , the best option in most cases is a mortgage when it comes to vacation homes. Especially after the Planning Act fell into place in 2017. The Planning Act has made it possible to borrow up to 75% of the value of the cottage in a mortgage institution. It also means that people with less savings have better opportunities to own a holiday home. It has been particularly noticeable for younger buyers, as these often have no or very little savings.
In addition, calculations from Good Finance Denmark show that there is up to between 300 and up to USD 600 to save per month if you borrow USD 1,000,000 for a holiday home through a mortgage loan. This means that there is a lot of money to be saved on this type of loan. But you also need to be qualified and that is a more onerous process.
The next opportunity for a cottage loan is through a bank. The interest rate is higher on a bank loan, but on the other hand there are lower foundation costs. Therefore, it can pay off on loans where the value of the cottage is less than 500,000 dollars.
A third option for a cottage loan is through a mortgage loan. It is an excellent loan option if the bank has denied you the loan for your holiday home. A mortgage loan is actually a good alternative when you need to borrow for a cottage. A major advantage of mortgage loan loans for the purchase of a cottage is that you as a buyer can get a loan of up to 95% of the purchase price of the cottage, which is why in many cases you can only settle for a payment of 5%. In the event that you have high home value in existing housing but do not have a large savings, it is possible to provide security in the home value and thereby get better loan terms.
The new rental rules help to lend to a holiday home
The political easing of the rental rules has also made it more attractive to rent out his holiday home and thus become a holiday home owner. This is based on the fact that the tax and mortgage rules for holiday homes have changed dramatically.
The base deduction on rental income has increased to USD 40,900, which makes it possible to own the cottage without the huge costs. In 2017, this deduction was USD 21,400. So we are almost dealing with a doubling. It also means that holiday homes sales have increased by 28% here in the first half of 2019 when compared to the same period of 2018.
For many holiday home owners, rental has become a significant addition to the economy, and in general it also creates more growth for Denmark. It supports areas of weaker demand and it benefits tourism throughout the country.
Loan for cottage with Good Finance
We hope you have learned why it is a good idea to borrow money for a cottage and how to do it. Good Finance is a mortgage loan specialist, where with the offer of our network of investors, we have the opportunity to offer you the best loan outside the banks.
You can read much more about how that process works right here. Should you have any questions about a loan for a holiday home or something else, please contact us.