Do I need a deposit to buy in Luxembourg?

You want to buy a property in Luxembourg, but Are you wondering whether you need a deposit? The answer depends mainly on the type of property you are buying. Here's what you need to know:

Do I need a deposit for a mortgage in Luxembourg?

Unlike most European countries, In Luxembourg, you don't necessarily need a deposit to take out a mortgage.

Since 2021, the Commission de Surveillance du Secteur Financier (CSSF) has established very clear rules that vary depending on your purchasing situation.

• For a first property purchase, you can obtain financing for up to 100% of the price of the property. However, you will have to pay the ancillary costs out of your own funds (bank charges, part of the registration fees not reimbursed by the tax credit, etc.). Bëllegen Akt" etc).
• For a rental investment, banks require a minimum deposit of 20%.

This flexibility means that Luxembourg remains an attractive market. Especially for first-time buyers who have to pay large sums to become homeowners.

What do the regulations say on the subject?

Again according to the rules of the Commission de Surveillance du Secteur Financier (CSSF), there is a uniform framework for all banks in Luxembourg.

The central principle is based on the LTV ratio (Loan To Value). This ratio compares the amount borrowed to the value of the property. The greater the amount borrowed in relation to the value of the property, the riskier the ratio.

These regulations are designed to protect both borrowers and banks against a backdrop of high property prices in the Grand Duchy.

To put it simply:

• If this is your 1st property purchaseYou can borrow up to 100% of the value of the property (excluding acquisition costs), provided you can prove that you have sufficient income to pay the monthly instalments (you can estimate your borrowing capacity for free here)
• If you already own a property and wish to buy it to let, the LTV ratio may not exceed 80%.. This means that you will need to provide a minimum deposit of 20% of the purchase price.
• If you change your main residence: the limit is set at 90%This can be extended to 100% under certain conditions, particularly if the purchase is accompanied by the resale of the old property. Ask your bank or a mortgage broker for more information.

Special case: if you buy abroad (France, Belgium, Germany). Whatever your situation, you will be asked to put down at least 15-20% of the price of the property as a down payment. Some banks even go so far as to ask for 30 to 40%. It all depends on the bank's pricing policy. A word of advice: shop around among the banks or go through an expert broker in Luxembourg.

How can I find a bank that lends without a deposit in Luxembourg?

There are banks that lend 100% of the price of the property.

However, these banks will ask you to cover at least the costs associated with the purchase of your property:

• Notary fees approximately 1% of the purchase price
• Mortgage fees Variable depending on the bank
• Bank handling fees generally between 0.5% and 1%

For example, for a €500,000 flat, you should expect to pay between €5,000 and €10,000 in ancillary costs. The 7% registration fees will normally be covered by the "Bëllegen Akt" tax credit (Find out more).

Make sure you also have a solid track record (permanent job, good management of your bank accounts) to reassure the bank about your profile.

To find a bank that lends without a deposit in Luxembourg, consult the current rate and contact the brokers or banks of your choice.

How much should you invest in your property project in Luxembourg?

The larger the deposit, the less you need to borrow, and therefore the cheaper the loan.

For example, for a flat costing €600,000 :

• With 20% of input You borrow €480,000 over 25 years at 3.2%, i.e. a monthly repayment of €2,300.
• No deposit You borrow €600,000 over 25 years at 3.5%, i.e. €3,000/month.

So, while it is important to have a substantial contribution, don't put all your savings into your property project. You still need to keep a little money aside in case of unforeseen circumstances, or to enjoy your holidays and your everyday life (don't tighten your belt too much).

To calculate the right intake, analyse :

• The rate and term of the loan : the higher these parameters are, the more expensive the interest will be.
• The money that will remain in your account (leave a little margin)
• The return on your savings : if your savings earn you more than the cost of the loan, it may be worth borrowing more and leaving your money in savings. This is particularly the case for those who put their money into investment funds.

You can calculate the cost of the loan (monthly repayments and borrowing capacity) on this website free simulator.