The Danish mortgage interest deduction (rentefradrag) is a tax benefit that reduces the amount of tax you pay on interest paid for mortgage loans. This guide explains how the deduction works, property taxes for homeowners in Denmark, and key considerations for your mortgage strategy.
What Is Rentefradrag?
Rentefradrag is a deduction for interest paid on mortgage loans secured by property. It applies to:
- Realkreditlån (mortgage bond loans) — typically lower interest rates
- Bank lån (bank loans) — often used to finance part of the purchase
- Both types qualify as long as the loan is secured against property in Denmark
The deduction reduces your taxable income, effectively lowering the cost of your mortgage.
How the Deduction Works
The deduction rate is 25.6% of interest paid in 2026. This means you get approximately 26 øre back for every krone of interest you pay.
The deduction is applied against your municipal tax rate, which averages around 25%, but varies by municipality.
Example Calculation
| Item | Amount |
|---|---|
| Mortgage amount | DKK 2,000,000 |
| Interest rate | 5% |
| Annual interest paid | DKK 100,000 |
| Deduction rate | 25.6% |
| Tax saving | DKK 25,600 |
Result: You effectively pay DKK 74,400 in interest after the tax benefit (DKK 100,000 - DKK 25,600).
Types of Mortgage Loans
Realkreditlån (Mortgage Bond Loan)
- Lower interest rates, typically 3-5%
- Long repayment periods (up to 30 years)
- Issued by specialized mortgage banks
- Backed by covered bonds (realkreditobligationer)
- Most common for home purchases
Bank Lån (Bank Loan)
- Higher interest rates than realkreditlån
- More flexible terms
- Often used for part of financing (e.g., 15-20% of purchase price)
- Both types qualify for rentefradrag
Prioritetslån (Flexible Loan)
- Flexible repayment terms
- Interest rate may vary
- Can be renegotiated with the bank
- Suitable for those who want flexibility in repayment
Payment Types
Annuetslån (Annuity Loan)
- Fixed monthly payments that decrease over time
- Early payments are mostly interest, later payments mostly principal
- Predictable payments, good for budgeting
- Most common loan type in Denmark
Afdragsfri (Interest-Only Periods)
- You can skip principal payments for up to 10 years
- Only pay interest during this period
- Still receive rentefradrag on interest paid
- Important: Total debt remains high during interest-only period
- After 10 years, you must start repaying principal
Consideration: Interest-only periods can be useful if you invest the difference elsewhere, but you must understand the total cost over the loan term.
Property Taxes
Ejendomsværdiskat (Property Value Tax)
Annual tax based on property value:
| Property Value (2026) | Tax Rate |
|---|---|
| Up to DKK 3,040,000 | 0.92% |
| Above DKK 3,040,000 | 3% |
Main residence deduction: DKK 700,000 reduction on the assessed value.
Example: Property valued at DKK 3,500,000 with main residence deduction:
- Taxable value: DKK 3,500,000 - DKK 700,000 = DKK 2,800,000
- Tax: DKK 2,800,000 × 0.92% = DKK 25,760
Ejendomsavancebeskatning (Property Gain Tax)
Tax on profit when selling property:
| Property Type | Tax Treatment |
|---|---|
| Main residence | Tax-free if you lived there |
| Summer house | 42% on gain |
| Rental property | 42% on gain (with indexation for inflation) |
Main residence exemption: If you sell your primary home and have lived there, the profit is generally tax-free. This is a significant benefit for homeowners.
Eligibility Rules
To qualify for rentefradrag:
- Property use: Must be owner-occupied or rental property
- Location: Property must be in Denmark
- Lender: Mortgage must be through an approved lender (bank or realkreditinstitut)
- Loan purpose: Must be used for purchasing, improving, or maintaining the property
- Documentation: Interest payments must be documented
Documentation and Reporting
Your mortgage provider automatically reports interest payments to SKAT via TastSelv. However, you should:
- Check your tax return annually to ensure accuracy
- Keep records of interest payments for your own reference
- Report any discrepancies to SKAT if you find errors
The deduction is typically applied automatically when you file your tax return, but you may need to manually add information if you have multiple mortgages or complex arrangements.
Worked Example: Couple Buying DKK 4M Apartment
Scenario: A couple buys an apartment for DKK 4,000,000 with 20% down payment.
| Item | Calculation | Amount |
|---|---|---|
| Purchase price | DKK 4,000,000 | |
| Down payment (20%) | DKK 4,000,000 × 20% | DKK 800,000 |
| Mortgage | DKK 4,000,000 - DKK 800,000 | DKK 3,200,000 |
| Interest rate | 4% | |
| Annual interest paid | DKK 3,200,000 × 4% | DKK 128,000 |
| Deduction rate | 25.6% | |
| Tax saving | DKK 128,000 × 25.6% | DKK 32,768 |
Result: The couple saves DKK 32,768 annually through rentefradrag, reducing their effective interest cost to DKK 95,232 per year.
Tips for Homeowners
Compare Realkredit vs Bank Loan Rates
- Realkreditlån typically offers lower interest rates
- Consider splitting financing: 80% realkredit, 20% bank loan
- Compare total cost including fees and repayment terms
Interest-Only Considerations
- Only use afdragsfri if you have a clear investment strategy
- Calculate the total cost over the loan term
- Remember that you must start repaying principal after 10 years
Optimize Your Mortgage
- Review your mortgage regularly to ensure it’s still competitive
- Consider refinancing if interest rates drop significantly
- Pay attention to any fees associated with changing mortgage terms
Property Tax Planning
- Factor property taxes into your budget
- Consider the impact of property value changes on your tax liability
- For rental properties, remember that property taxes are deductible expenses
Key Takeaways
- Rentefradrag provides a 25.6% tax deduction on mortgage interest paid
- Both realkreditlån and bank loans qualify for the deduction
- Interest-only periods (afdragsfri) can reduce monthly payments but keep debt high
- Ejendomsværdiskat is an annual property tax with rates of 0.92% up to DKK 3.04M and 3% above
- Main residence sales are tax-free — a major benefit for homeowners
- Your mortgage provider reports interest payments automatically, but check your tax return
- Consider the total cost of your mortgage strategy, including tax benefits and property taxes
For more information on Danish property taxes, see our property tax guide. For investment strategies that might complement your mortgage planning, explore our investing for beginners guide.