Loans for a parental purchase: financing, down payment and the 20% rule

For an owner-occupied flat or other owner-occupied home, the mortgage loan (realkreditlån) typically covers up to 80% of the purchase price, 15% is financed with a bank loan, and you put down at least 5% yourself as a down payment. This is the so-called 5-15-80 structure.

If, on the other hand, you buy into cooperative housing (andelsbolig), the calculation looks different. You cannot get a mortgage loan on the share itself, because mortgage loans require security in real property. Instead, you finance the share with at least 5% of your own funds and a cooperative housing loan from the bank. The cooperative has its own loans on the property, and you help pay them through your monthly housing charge. You have no control over the refinancing or the interest terms of the cooperative’s loans. That is an important difference from an owner-occupied home.

For example, a flat costing 2,5 million kr. can typically be financed with a mortgage loan of up to 2 million kr., and the remaining 500.000 kr. must then come from your own funds and bank financing, of which you must contribute at least 125.000 kr. yourself, equivalent to 5% of the purchase price. On top of that come the purchase costs.

Down payment and loan-to-value in a parental purchase: how much you put in yourself

The minimum down payment on a parental purchase (forældrekøb) is 5% of the purchase price, whether you buy an owner-occupied flat, an owner-occupied house or a cooperative housing unit. That is the theoretical minimum, but in practice many parental purchases will require more.

The rules of the Danish Financial Supervisory Authority (Finanstilsynet) generally require an adequate down payment, which in practice means at least 5%. The bank does, however, make its own credit assessment, and when a parental purchase also involves renting the home out to your child, the bank can often require a larger down payment. In other words, the less security there is in the home itself, the more you have to put in yourself.

On top of the down payment come the purchase costs, which you pay in addition to the 5%. The registration fee (tinglysningsafgift), the preparation of documents and any valuation must be part of the calculation from the start. Registering the deed costs 1.850 kr. plus 0,6% of the purchase price, and registering the mortgage costs 1.825 kr. plus 1,25% of the loan amount, so the less you borrow, the less you pay in fees on the mortgage.

The real down payment is, however, closely linked to your overall financing. Many parental purchases are financed with a combination of a mortgage loan, a bank loan or home loan and equity in your own home, so how much you have to put in yourself depends to a large extent on how much equity you can release. This is where the loan-to-value ratio of the parental purchase becomes a concrete figure rather than a principle. A higher loan-to-value ratio means a smaller down payment, but also more expensive loan terms.

Loans for a parental purchase: the bank’s role and the loan mix

When you need to finance a parental purchase, it is first and foremost the bank you talk to. The bank is usually the gateway to both the bank loan and the arranging of the mortgage loan, which means your choice of bank is central to the entire financing of the parental purchase.

That is exactly why it is worth comparing offers before you sign. Even small differences in interest, contribution fees, charges and repayment profile can make a noticeable difference to the overall calculation when the loan runs for many years. A difference that looks insignificant on a single offer can grow large when it is multiplied over the entire life of the loan.

This applies especially if you are considering a cooperative housing unit. In a housing cooperative, a parental purchase requires that the articles of association allow it, or that the general meeting grants an exemption. The board cannot approve it on its own. Banks are also often more reluctant to lend for parental purchases of cooperative housing than of owner-occupied homes, so expect stricter requirements for your finances and your down payment. It is worth taking this into account as early as your search for a home, so you are not met with a no after finding something you want to buy.

Tax relief on interest also belongs in the calculation. Interest expenses on the loan for the flat can be deducted as negative capital income, just as with a loan on your own house, but the deduction has the same value as for a private owner-occupied home, i.e. around 33%. So do not count on any special tax advantages from the arrangement, just the ordinary deduction you know from your own home.

What a parental purchase costs: budget and fixed expenses

How much a parental purchase costs you depends to a large extent on the expenses that come round every month, year after year, and the budget for the parental purchase must allow for them from day one.

The recurring items you need to allow for each month are typically:

• Contribution fees, which are paid on top of the interest and affect the monthly payment.

• Interest on the loan, which accrues month by month.

• Repayments, which gradually reduce the debt.

• Any owners’ association fees, which come on top.

A parental purchase requires solid finances, because you may end up with a monthly deficit after tax, especially when interest rates are high.

New mortgage loans to households cost an average of 4,1% including contribution fees in August 2026, so the budget must take the level of interest rates into account. Even a small rise in interest rates can be felt when the loan runs for many years.

On the plus side, several of the expenses can be deducted in your accounts for the rental. Deductible expenses include municipal land tax (grundskyld, a property tax) and shared costs paid to the owners’ association. If, for example, you have shared costs of 18.000 kr. and land tax of 4.500 kr. a year, that is 22.500 kr. in deductible expenses that you can include in the overall calculation.

Selling to your child later: purchase price and the 20% rule

When you sell the home on to your child, the price does not have to match the public property valuation. You can give a discount of up to 20% on the valuation, and that discount does not trigger gift tax. The limit used to be 15%. It was raised to 20% by an amending circular from September 2021.

There is, however, one condition you need to be aware of. The 20% rule only applies once the owner has been notified of a new public valuation under the new valuation rules. If the home has not yet received a new valuation, the discount can instead be up to 15% of the latest old valuation.

An example makes it concrete. If the public valuation is 2.000.000 kr., you can sell for 1.600.000 kr., and the 400.000 kr. discount does not trigger gift tax. It is this discount that lowers the purchase price and therefore your child’s acquisition cost.

But the 20% rule is not a guarantee. The Danish Tax Agency (Skattestyrelsen) can disregard the rule if there are special circumstances, that is, specific factors suggesting that the public valuation is too low compared with the home’s real value. If that happens, you may face a back-payment of tax and gift tax that you had not seen coming. The discount is calculated from the public valuation, not from a private valuation. Talk to an accountant or a lawyer before you set the price.

Doing the sums on a parental purchase: how to put the figures together

A sound parental purchase starts with a precise calculation. Four things need to add up before you commit to anything:

• The purchase price, which sets the framework for the whole calculation.

• The down payment you have to make yourself.

• The borrowing costs that come with the financing.

• The running costs, which have to fit in with everything else.

None of them can stand alone. You agree the purchase price with the seller, but the mortgage lender and the bank make their own valuation of the home, and that is what the loan is calculated from.

Brikk can put you in touch with a lender who can work through the financing with you, so you get concrete figures to build on. With the figures in hand, you can work out the 5-15-80 structure and talk to the bank from an informed starting point rather than a rough estimate.

The down payment, the loan-to-value ratio, the bank’s requirements and the monthly items are all tied to the price of the home and the lender’s valuation. When you later sell to your child, it is the public valuation that sets the framework for the price. Get those figures in place first, and the rest of the calculation becomes a matter of numbers rather than guesswork.

So the concrete next step is to get a loan offer based on your finances and the home you want to buy. If a home is later to be sold on the open market, you can book a free, no-obligation sales valuation with Brikk.