Ex-patriot American finds it easy to buy home in Denmark

By Kenneth V. Smith

AALBORG, Denmark Far from California where he was born and raised, Mike Sando is an entrepreneur working hard to introduce Mexican food to Danes. While preparing an order of tacos and burritos to go, he grumbles about the difficulties of getting authentic ingredients and about the Danish tax system that takes nearly half of his net income.

But, then Sando begins talking about his newly purchased home that is just a 20-minute bicycle ride from Mike's Tacos in downtown Aalborg. His mood lightens. He smiles and says that owning his own home makes it worthwhile to work long hours preparing Mexican food in a seaport city in northern Denmark once inhabited by Vikings.

Standing near a wall menu of "Mexikansk Fast Food" that describes meals in an odd combination of Danish, English and Spanish, Sando said he doesn't believe that under similar circumstances he would be able to buy a home in the United States."Just imagine someone with an untried idea of opening a very small fast food shop in San Francisco," Sando said.

"Now, how much luck do you think I would have in getting a loan to buy a home in a suburb like Walnut Creek? I've been in business for less than two years, I don't have much cash, I'm self-employed, and I don't have much of a credit history."

After a slow start, business is growing at Mike's Tacos. At first, customers were the few Americans who live in Aalborg, in addition to Mormon missionaries, young Danes who had been spent time in the United States, and Middle Eastern immigrants who craved a spicier food than the normal Danish fare. Then, Danish office workers and sales clerks became regular lunch customers. Sando felt confident enough about his future and he wanted to buy a home.

Most homes in Denmark are listed and sold by real estate agents, but Sando bought his home from a friend. Once he decided he wanted to buy the home, Sando began working with a real estate agent who set a value on the property and started the paperwork.

The real estate agent then referred Sando to Nykredit Bank, Denmark's largest residential lender. Laws governing mortgage credit in Denmark permit no more than 80 percent of loan to value, so Sando borrowed the 20 percent down payment from a friend.

Because he is a resident alien in Denmark, Sando was asked by Nykredit Bank to take two additional steps not usually required in obtaining a home loan. He provided a copy of his payment history on a motorcycle he purchased on credit, and an acquaintance wrote Nykredit a letter of reference attesting to Sando's character as a businessman.

"That was it," Sando said. "In less than six weeks, the house was mine."

At Nykredit Bank's corporate headquarters in Copenhagen on the opposite end of Denmark, Henrik Hougaard said six weeks is longer than the average to close on a sale of residential property. "It usually takes a little less than four weeks now, but we're working on automating the process to cut that time down to two weeks," said Hougaard, Nykredit's chief of corporate communications and online services.

Qualifying for a home loan in Denmark is easier than in the United States. Denmark has no credit history reporting system. Banks share lists on defaults and fraud, but payment histories on previous loans are not released to others.

"Credit history is not really very important to us," Hougaard said. "This is because we make the loan on the property, not personally to the borrower. If a borrower gets in trouble, we go in very early and help work things out. If this isn't possible, we go to a forced sale."

Typically in Denmark, the home loan does not come directly from the bank. "In financing a home purchase, Nykredit is like a tube between the borrower and the investor," Hougaard said. "Bonds are issued for the purchase money, then those bonds are sold on the free market."

Throughout Denmark, Nykredit has 44 branch offices where home loans are made, along with 250 real estate sales offices. The degree of integration of real estate services is unheard of in the United States. In addition to selling the home and making the loan, Nykredit also offers the equivalent of title and escrow services.

With 550,000 active home loans, Nykredit (pronounced "new credit") has 39 percent of the mortgage business in Denmark. Other major lenders are Den Denske Bank and Unibank, each with about five percent of the market.