Buying a house

Buying A House

Buying a house anywhere is a big decision, and for many, it will likely be one of the biggest expenses in their life. It becomes harder when you are buying a house in a foreign country. Here we will break down the process of buying an apartment or a villa in Sweden. Unless you are buying a house completely with your own savings, you would need to wait for filing one tax return before getting a bank loan approved. There can be exceptions, but that’s the thumb rule of getting a loan. It takes about three to five months for you to start the process and enter your own house.

Seven steps to buying a house:

  1. Find a location
  2. Make a budget
  3. Apply for a bank loan
  4. Go for viewing
  5. Bid for house
  6. Sign contract
  7. Take possession

Where to buy? This is a very personal question as everyone has a different choice and affordability. We have narrowed down to the really basic pointers: 

a) Find a house closer to your workplace. While many of you might be working remotely, you could still be called back to the office. If your job is truly remote, your company wouldn’t have brought you to Sweden. Areas like Kista, Solna, and Södertälje became popular for Indians because of their proximity to several companies. 

b) Stay within the main city limits of Stockholm, Gothenburg, or Malmo. On the plus side, everything is available nearby, and well connected by public transport. On the minus side, they usually cost a lot of money.  A 40sqm apartment in Vasastan costs about 3.5 million SEK.

c) Stay in the suburbs. This is the preferred option as they are closer to the city center and the prices are comparatively lesser. However, all suburbs may not have proper access to public transport. Check them before looking for one.

d) Stay close to nature. There are several areas within one hour of commute distance from Stockholm city offering leafy neighborhoods and forestry areas. The prices are also lower than suburbs and you can get bigger houses. However, some areas would need you to have a car to commute.

Two things you need to keep in mind: find a place which is safe and which is connected by public transport. Read about various locations here.

How to find a house to buy? After you have picked a place, go to Hemnet to look for an apartment. Don’t jump to buy a house immediately. Put a location in the search bar, see what the asking prices are, and then go to the tab – final prices – to see how much was the sale price of previous houses. That will give you an idea of your prospective budget. Houses are sold in two ways: a) fixed price – you pay the seller their asking price and b) you bid for the house with others.

How does bidding work? After you have selected a house, contact the broker named in the post to go for a viewing or visning. The posts usually have a time mentioned when you can go and see the property yourself. If you like the property, you can ask the broker if the seller would sell for a fixed price. If not, you would need to enter a bidding process. The broker will take your personal number and enter you in the bidding. You would also need a loan promise or lånelöfte. If there are multiple bidders, you can submit your bids by sending a text message to the broker. If you win the bid, you will be called to sign a purchase contract. 

Here’s how the process typically works:

  1. The property is listed for sale and interested buyers are invited to submit written bids.

  2. Bidders typically have a set amount of time to submit their bids, which must include the price they are willing to pay for the property as well as any other conditions of the sale.

  3. The seller reviews all of the bids and chooses the one that meets their needs and expectations. This may include the highest price, but other factors such as the buyer’s ability to obtain financing or the terms of the sale may also be considered.

  4. If the seller accepts a bid, the buyer and seller enter into a legally binding contract to complete the sale.

It is important to note that auction bidding is just one way to buy a house in Sweden. In some cases, properties may be sold through a traditional negotiation process, where the buyer and seller agree on a price without the need for formal bidding. It is also possible to buy a house through a real estate agent or broker, who can help facilitate the transaction and handle the legal and administrative aspects of the sale.

How to get a bank loan? You would need to collect 15% of the downpayment of the house price and the rest is given by the bank. For example: for a 3 million SEK house, you would need 450,000 SEK (about Rs. 36 lakhs) as a downpayment.

If you are unable to gather the downpayment, you can go to a bank like SBAB where you would need to give 5% as a downpayment and the bank gives you a personal loan for the 10%, apart from 85% as a mortgage loan. For example, for the same 3 million SEK house, you would need to pay 150,000 SEK as a downpayment while the bank gives 300,000 SEK as a personal loan and the remaining 2,55,0000 as a mortgage loan. The downside is that a personal loan would have a higher interest rate.

The bank decides on your eligibility based on factors such as your salary and your age. If your eligible amount is less, you can choose to make your working spouse as co-applicant to increase the loan amount.

You can check your loan eligibility by putting details on your chosen bank’s loan promise page, like this one for SBAB. A loan promise is a document in which a bank details how much loan they can give you to buy a property. And here is where the confusion arises. This is just an initial loan promise. You need to submit all your documents – salary slip, identity proof, a letter from the company etc. – to get the formal loan promise. If your documents are in order, the banks can approve the loan promise over a phone call.

MSH Opinion: Interest rates have increased quite fast in 2022 which makes your EMIs that much more expensive. It’s ideal to choose fixed interest rates for the time volatility stays.

What to check during viewing? Viewing is your chance to see what you are buying. Check the quality of the wooden floor, walls, kitchen, and bathroom. Plumbing costs a lot of money in Sweden and a bathroom over a certain age is not covered under insurance. So make sure to ask about any existing problems. Brokers will answer all your questions. Here it is the responsibility of the buyer to check for any defects. If you are not satisfied with the first viewing, you can ask for another. You can also hire an inspector to check the apartment on your behalf. If you are buying a new construction, the level of scrutiny required is much less.

Role of brokers in buying a house – In Sweden, brokers play an essential role in buying a home. They can help you find properties that meet your needs and budget and provide you with information about the local real estate market. Brokers can also help you negotiate the terms of the purchase with the seller and assist with the paperwork and legal aspects of the transaction. It is important to note that brokers in Sweden are regulated by law and must adhere to strict ethical standards. They must also be licensed and insured in order to practice. They will also clearly mention any flaws in the property. Brokers typically charge a commission for their services, which is paid by the seller of the property.

Completing the purchase – After you win a bid, the broker will send you documents to you via email that you would need to sign and return. You would need to submit the same documents to your bank. And this is the beauty of the system – the broker talks to the bank, sellers’ building association, and other parties and finalize everything. You sit back, apart from signing a few documents. Usually, it takes three months for the property to be handed over to you. You would need to pay 5 or 10% of the amount as agreed between the parties. Just before possession, you would need to go to the broker’s office to sign a bunch of documents and take the key to the house after the bank has transferred the remaining money to the seller via the broker.

What to check while taking possession? When taking possession of a house it is important to carefully inspect the property to ensure that it is in the condition that was agreed upon in the purchase contract. Here are some things to check:

  • Physical condition: Look for any visible signs of damage or wear and tear, such as cracks in the walls or floors, leaky plumbing, or outdated electrical systems.
  • Appliances and fixtures: Make sure that all appliances and fixtures, such as the heating system, water heater, and kitchen appliances, are in good working order.
  • Safety features: Check that the house has working smoke detectors and carbon monoxide detectors and that all windows and doors are secure.
  • Landscaping: Inspect the condition of the yard and any outdoor features, such as fences, decks, or sheds.
  • Documentation: Review all of the documentation related to the house, including the purchase contract, title deed, and any warranties or guarantees.
  • It is a good idea to document any issues or concerns you have when taking possession of the house and to address them with the seller or your real estate agent before completing the sale. This will help ensure that the property is in good condition and meets your expectations.

If you find any problems, contact the broker immediately.

Additional Topics:

When is the right time to buy a house? There is no one-size-fits-all answer to the question of when is the right time to buy a house in Sweden. The decision to buy a house will depend on a variety of factors, including your personal circumstances, budget, and housing market conditions.

Here are a few things to consider when deciding whether now is the right time for you to buy a house in Sweden:

  • Financial readiness: Make sure that you are financially prepared to take on the responsibility of homeownership. This includes having a stable income, a good credit score, and sufficient savings to cover the down payment and closing costs.
  • Housing market conditions: Consider the state of the housing market in the area where you want to buy. If prices are rising or there is high demand for housing, it may be a good time to buy. If prices are falling or there is a surplus of properties for sale, you may want to wait until conditions improve. Housing prices have on average fallen by about 20% since their peak in 2022, so you might get some bargain deals. However many sellers may also be holding on selling their properties to get a better price later.
  • Personal circumstances: Think about your personal circumstances and how they may influence your decision to buy a house. For example, if you are planning to start a family or make a long-term commitment to a particular area, it may be a good time to buy. On the other hand, if you are uncertain about your future plans or are not ready to make a long-term commitment, it may be better to wait.

Apartment vs villa – The decision to buy an apartment or a villa in Sweden will depend on your personal circumstances and preferences. Some things to consider when making this decision include:

  • Location: If you want to be in a specific part of the country or city, this may influence your decision. For example, apartments may be more common in urban areas, while villas are more commonly found in suburban or rural locations.

  • Size and layout: Consider how much space you need and how you want to use it. An apartment may be a good choice if you want a smaller, more efficient space, while a villa may be better if you need more room or want a more traditional layout. Villas generally look more gorgeous and project upscale living.

  • Maintenance and upkeep: Villas often require more maintenance and upkeep than apartments, as they typically have more outdoor space and features such as yards and gardens. If you don’t want to spend a lot of time or money on maintenance, an apartment may be a more appealing option.

  • Electricity cost: Villas tend to have more electricity costs than an apartment. It is not unheard of that electricity costs of villas exceed 20,000 SEK per month during peak winter months.
  • Price: The cost of buying an apartment or a villa in Sweden will vary depending on the location, size, and condition of the property. In general, apartments may be less expensive to purchase, but they may also have higher monthly costs for things like utilities and maintenance fees.

Old apartment vs new construction – There are pros and cons to buying an old apartment versus a new construction in Sweden. Here are some things to consider when making this decision:

  • Cost: In general, new construction apartments may be more expensive to purchase than older ones. This is because they typically have more modern features and finishes, and they may be located in more desirable areas.

  • Maintenance and repairs: Older apartments may require more maintenance and repairs, as they may have outdated systems or wear and tear from previous occupants. New construction apartments, on the other hand, should be in good condition and require less maintenance in the short term.

  • Energy efficiency: New construction apartments are often more energy efficient than older ones, as they are built to meet current building codes and standards. This can result in lower energy bills and a more environmentally friendly home.

  • Personal preference: Some people prefer the charm and character of older apartments, while others prefer the modern finishes and amenities of new construction. It is important to consider your personal preferences when making this decision.

What is Brf? In Sweden, “Brf” is an abbreviation that stands for “bostadsrättsförening,” which translates to “housing cooperative.” A housing cooperative is a type of legal entity that owns and manages a building or group of buildings that are used for residential purposes. Members of the cooperative own a share in the cooperative, which gives them the right to occupy a specific apartment or unit within the building.

Housing cooperatives are a common form of housing in Sweden, particularly in urban areas. They are owned and governed by the residents themselves, who are responsible for making decisions about the operation and maintenance of the building. Members of the cooperative typically pay a monthly fee to cover the cost of maintaining and operating the building, and they may also be required to pay an initial purchase price for their share in the cooperative.

Housing cooperatives offer a number of benefits, including the ability to own a home without having to take on a mortgage, a sense of community and shared ownership, and the opportunity to have a say in the operation and maintenance of the building. They can be a good option for those who are interested in living in a more communal setting.

All Brfs are rated by the government. A rating of “A” means the financial condition of the housing association is good. You would need to watch out for ratings of C or below.

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