Home equity loans and credit lines: the bank’s loans secured on your home

A home equity loan (prioritetslån), which some banks call a home credit line (boligkredit), is a bank loan secured on your home. Many of them work like an overdraft facility. Your salary and savings sit in the same account and reduce the debt from day to day. You only pay interest on the amount you are actually using right now.

Your interest costs fall continuously with no extra effort. That gives you peace of mind and flexibility in everyday life. Many homeowners choose it because it is more flexible than a traditional mortgage loan (realkreditlån) and can easily be adapted to your finances.

How a home credit line works in practice

A home credit line works as a flexible credit facility secured on your home. The bank sets the ceiling based on the value of the house, your current debt and your monthly disposable income. The bank carries out a credit assessment and registers a charge on the property. The registration fee (tinglysningsafgift) is 1.825 kr. plus 1,25 % of the amount secured by the charge.

Interest is calculated day by day on the amount you have drawn. The interest itself is added monthly or quarterly. Because it is calculated continuously, your interest costs closely follow what you actually use.

1. You can pay in extra at any time and withdraw it again within the limit, with no fees or price losses.

2. Salary and savings in the account reduce the outstanding debt. If you have 100.000 kr. in the account for 30 days at 4 % p.a., you save about 329 kr. in interest before tax.

3. Going over the limit can trigger overdraft interest or fees. The bank can also change the limit and the rate if the risk changes or market conditions require it.

You must be notified in good time before the bank changes the terms of your home credit line.

What does a home equity loan cost in interest compared with a mortgage loan?

The interest rate on a home equity loan is usually variable. According to Nationalbanken (Denmark’s central bank), the average rate on banks’ outstanding overdraft facilities for housing purposes was 4,1 % in August 2026. By comparison, new mortgage loans to households cost 4,1 % on average including contribution fees, and for loans with a rate fixed for more than 10 years it was 4,8 %. Your own rate depends on the bank, your finances and the loan-to-value ratio. When you refinance a mortgage loan, there may be price losses on the bonds. That does not happen with a home equity loan, because you do not carry the same bond risk.

The loan-to-value ratio drives much of the price. If your loan-to-value ratio is around 60 % or lower, you will usually get a lower rate from the bank. The higher the loan-to-value ratio, the higher the rate you should typically expect. The bank prices in the extra risk.

An important advantage is being able to keep your savings in the same account. Your balance is deducted from the debt day by day and lowers your interest costs. If your average balance equals 20 % of the amount you have drawn, your interest costs fall by around 20 %. So even with a higher nominal rate than on a mortgage loan, your total costs can end up about the same or lower, provided you keep a healthy cash buffer.

Tax matters too. Interest on private loans is deductible against capital income (kapitalindkomst). The net gain after tax depends on your tax rate and on whether your total capital income ends up positive or negative. This gives different results from person to person.

Look at the other costs too. The set-up fee is often between 0 and 5.000 kr., and on top of that comes the registration fee plus possible account fees. There is no contribution rate (bidragssats) as there is with a mortgage loan. The bank’s interest margin covers both risk and running costs.

Home equity loans and mortgage loans meet different needs

Start with where the money comes from. Mortgage lenders lend via bonds, that is, through the market with many investors. The bond price determines how much is paid out to you relative to the debt you take on, and the contribution rate comes on top of the interest. That can noticeably increase your total costs. The advantage is peace of mind: a fixed rate for up to 30 years and often interest-only periods. A stable payment, even when interest rates rise.

A home equity loan from the bank works without bonds or bond prices. It is more like a flexible overdraft facility secured on your home. You pay in and withdraw as needed, and there is no fixed repayment schedule behind it. The rate is variable and follows the market. A chance of a low rate, yes, but also a risk of rapid rises without the protection of a fixed-rate mortgage loan.

The risk is therefore spread differently. With a fixed-rate mortgage loan, the payment is fairly stable throughout the term. The rate on a home equity loan follows the market closely. If rates shoot up, your costs rise accordingly. That requires some slack in your finances.

When it comes to refinancing and paying off the loan, the mortgage-credit model offers some options. The bond structure makes it possible to convert when bond prices move favourably, so there can be gains when interest rates fall or rise. That makes refinancing attractive but also more complex, and price losses lurk in turbulent markets. A home equity loan has no price gains or losses. You pay it back without any extra market fluctuations.

The two loans also serve different purposes. A mortgage loan suits you if you are after low, stable financing over a long period and want to know what your payment will be. Good for ordinary home financing without big fluctuations. A home equity loan is a better fit when cash needs to be moved quickly. Renovation in stages, temporary needs, situations where flexibility outweighs the lowest rate.

The difference is not just about figures. It is about how much freedom and risk you want in your home finances.

When does a home equity loan make sense, and when is a top-up loan smarter?

A home equity loan makes particular sense if your finances vary from month to month. If you receive bonuses or run a business with uneven income, you can keep using your savings to reduce the actual debt. That means lower interest costs without refinancing or extra fees.

If you are planning a renovation in stages, a home equity loan is also a good fit. Instead of borrowing the whole amount with a top-up mortgage loan (tillægslån) and paying full interest from day one, you only withdraw money when the tradespeople’s bills land. So you only pay interest on what you have actually used.

If you buy a new home before the old one is sold, or own two homes for a while, a home equity loan provides a flexible cash-flow bridge. Repayments can be adjusted along the way, and you avoid price losses on refinancing. The amount drawn can be adjusted as needed within the limit, which often makes this solution more attractive than an extra mortgage loan for short periods.

Over a longer period, however, a top-up mortgage loan is often cheaper, especially if you would be using the full credit limit all the time. A fixed rate and the option of an interest-only period give your budget stability. A home equity loan has a variable rate and daily interest calculation, so it is less predictable.

As a rule of thumb: if you often have a decent sum sitting in the account for most of the month, a home equity loan can match the price. If you rarely have money sitting there, a top-up loan is often the cheapest solution.

How to compare terms on home equity loans

Flexibility in your home loan gives you financial peace of mind. With a home equity loan, you get a credit line linked to your home, where the balance in the account brings your interest down. You control the repayments yourself, and you can adjust how much you draw within the limit as you go. The focus is not only on the lowest possible rate. What matters is matching your habits, your spending and needs such as an interest-only period or variable use of the credit.

Danish banks call these products different things, for example prioritetslån (home equity loan) or boligkredit (home credit line). Compare offers carefully so that you do not overlook small terms that prove costly later. Look in particular at:

• Interest rate and margin: Which reference rate does the bank use, and how large is the margin on top? How quickly does it adjust the rate when things change?

• Loan-to-value ratio and fees: How much can you borrow against your home? The best price is often at up to 60 %. How much are the set-up fee and the ongoing account fees?

• Interest-only periods and tie-ins: How long is an interest-only period granted for? At some banks, up to 10 years. What notice periods apply, and does the bank require your salary, cards and insurance to be moved to them?

Prepare your application. Have your payslips, annual tax statement (årsopgørelse), budget, valuation of the home and details of mortgage deeds ready. It saves time and cuts down on back-and-forth.

Work out your cash flow before you choose. If you often have money sitting in the account, a home equity loan can give a lower net interest rate than an ordinary top-up mortgage loan. Compare specific terms at several banks, and choose between maximum flexibility and a more fixed price structure, whichever suits your everyday life.