Loan assessment

The term loan assessment is used when taking out or refinancing a loan - typically a mortgage loan.

The loan assessment is an essential part of the overall assessment of whether a borrower can and may get a loan, reschedule a loan or similar.

What is a loan assessment used for?

Real estate is often the largest asset for the vast majority of Danes - and therefore naturally has a crucial value when a lender assesses a borrower's creditworthiness.

Real estate in Denmark has historically had a positive increase in value, which means that your home has probably increased in value if you have owned it for a longer period of time. For this reason, it is of course relevant for the bank, mortgage company or other lender to find out what your property is worth - as part of a credit check.

Similarly, a loan appraisal can also be used to determine if a property has decreased in value. If this is the case, there is typically not the same opportunity to take out a new loan or increase an existing loan.

Loan to value ratio

When talking about loan scoring, the concept of loan-to-value ratio is also central.

Basically, you can mortgage a private home with up to 80%. This means that if you're interested in buying a property worth DKK 1,000,000, you can borrow a maximum of 80% - that's DKK 800,000. You must provide the remaining 20% yourself.

Typically, many will be able to borrow an additional 15% from the bank as a regular bank loan, while you are usually required to finance the remaining 5% yourself.

If you want to take out additional loans on your home at a later date, it requires either that you have paid off your existing debt significantly - or that the property has increased in value so that your loan-to-value ratio is still sufficiently low.

It is precisely the loan assessment that forms the basis for this assessment.

How does a loan assessment work?

A loan appraisal is carried out by the bank or mortgage company requesting an appraiser - typically a real estate agent or an appraiser.

The appraiser will conduct a physical inspection of the property and then prepare a loan valuation. The valuation is not necessarily the same as a sale price a real estate agent could achieve, but is based on a wide range of factors such as the condition of the property, location, and prices of similar properties in the area.

What affects a loan rating?

Several factors influence a loan appraisal - including the condition of the home, the neighborhood and what similar properties are selling for in the area.

As a homeowner, you can influence your loan rating to a certain extent, for example by regularly maintaining your property and keeping it in good condition.