How to save money on your mortgage, like a boss

Nesta _SE
Nesta _SE
Nov 7 · 5 min read
Three friends understanding their credit score and how it affects their mortgage rate.
Three friends understanding their credit score and how it affects their mortgage rate.
“And that number there is all those credit cards we maxed out on our trip…”

Congratulations, it’s a house! Well, almost. You’ve definitely decided that you’re probably ready to switch from renting to owning your first home. So after reading up on the best locations for first-time homebuyers you found, or are in the process of finding your perfect match property. Just one little thing: you’re stressing about how you can afford it all. Words like “mortgage”, “amortization” and “interest rates” have started popping up in your head. It’s all a mess.

We feel you. Lately at Nesta we’ve been thinking a lot about mortgages. Like, a lot. And we’ve come to realize that, in this day and age, “sorry” doesn’t seem to be the hardest word (sorry, Elton John). “Mortgage” on the other hand, totally does.

Truth is that unless your last name is Bernadotte or something, you’ll most probably need a mortgage to be able to buy your first house. Don’t worry, you’ll be in good company. 80% of homeowners in Sweden have a home loan that are currently in the process of paying off. Add this to the fact that housing prices in Sweden keep increasing and you begin to understand why mortgage, not meatballs, has become the new dish du jour in every Swedish home.

Of course where there’s a need, there’s also opportunity. The mortgage market in Sweden is highly competitive, with both established financial institutions and new kids on the block trying to get the attention of people like you.

So as you try to make sense of all the different banks and offerings out there, keep in mind one thing: you always have the power to save money on your mortgage. Really.

Here’s how you can do it.

Understand your credit score

Credit checks are like the Kardashians: no matter what you do, you really can’t avoid them. So you might as well keep up with them. (And this is as far as we’re willing to push this analogy.)

Any bank or financial institution considering extending you a loan, will have to run a credit check on you first . That’s the same everywhere in the world. In Sweden, most companies use a service called UC (Upplysningscentralen) to get their private credit score reports.

So what exactly will UC (or any other similar company) look into when they run a credit check on you on behalf of your potential new bank/creditor? Basically how “trustworthy” you seem; how much of a risk for defaulting on your loan payments you seem to pose.

This assessment will be based on:

  • Your credit-to-income ratio, both current and projected within the next 12 months.
  • Your average use of credit cards within the last 12 months (and how many credit cards you’re using).
  • How much exactly is your current debt from other loans and credit cards.
  • If you have any payment complaints (betalningsanmärkning): for instance, if the Swedish Enforcement Authority has made a comment on your record noting that you haven’t paid some of your debts/bills on time.
  • How many other people/institutions have run a credit check inquiry on you. It may sound weird, but the more people run credit checks on you, the more your overall score is affected negatively.

The end result will be a percentage that denotes how much of a financial “risk” you are, as well as a number from 1–999 that denotes your credit score. Generally, any risk percentage from 0,1%-4,0% is considered good, from 4,1%-25% is considered “less good” and anything above 25,1% is considered “high risk” and lowers your chances of being granted a loan.

As for your credit score, anything from 1 to 558 is considered less good, whereas from 559 to 999 is considered (increasingly) better. So basically what you want to achieve is a low risk percentage and a high credit score.

Tip: Your credit score may be affected negatively by the amount of people/institutions that are looking into you, but it won’t be affected if you check it yourself (it’s called a “soft” enquiry). It’s actually a great idea to check your own credit score: you can get a holistic understanding of how your financial profile is being perceived by potential creditors.

Once you know how you rank and why, you can…

Go ahead and improve it

Improving your credit score not only gives you a better chance of securing that mortgage, it also gives you a fighting chance to negotiate a potential better mortgage rate.

Of course, unless you win the lottery, you can’t magically change your income and spending habits. But by reading your credit score report, you can identify the things that are hurting your score and prioritize fixing those first.

Payment remarks, for example, are usually the worst offenders.

When you don’t pay debts and bills in time, the Swedish Enforcement Authority issues a record of non-payment (that’s also called a “black mark”) that will be registered against you. The best way to avoid that is being proactive: if you think you won’t be able to pay an invoice or a debt in a timely manner, you should always, always, contact the company or organization you owe the debt to and try to set up an installment plant or get some extra time to pay off your debt.

For debts/invoices with public organizations or state agencies, you can negotiate a payment plan with Kronofogden. When it comes to private debts or bills, Kronofogden cannot help you but there are some new products and apps in the Swedish market that can help you manage your budget or even refinance your loans and credit cards. While these products are very cool (and can definitely help you pump up your savings), unfortunately most of them can’t help you optimize your actual mortgage.

That’s where we come in.

Let Nesta do the heavy lifting

We know that negotiating with banks to get a better mortgage rate is always possible — and now you do too. But we also know it takes a lot of time and effort that you’d rather spend elsewhere. So we’ve already done it for you, with the help of our partner bank.

All you need to do is check out the “Afford it” section on our website and decide how low you want your mortgage rate to go.

Tip: the more services you add from the options we offer (some are free), the better a rate we can negotiate for you. You can even see your mortgage rate and monthly payment on the top of your screen decrease in real time!

We did tell you we spend a lot of time thinking about mortgages, didn’t we?

Nesta _SE

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Nesta _SE

Turning renters into owners. Budget, find and afford your first home — in three simple steps! #rentingsucks nesta.se

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