Find your property financing in Luxembourg: the complete guide

Looking to buy your first home in Luxembourg? It's not going to be easy: finding a suitable financing at the best rate can be an obstacle course. You'll need to do a lot of research, compare banks and be patient. But you can save tens of thousands of euros: so it's worth it!

Here's everything you need to know to find the best loan in the Grand Duchy...

How does a mortgage work in Luxembourg?

Financing a property purchase, in detail

A home loan is a sum of money lent to you by a bank for a fixed term, at an interest rate decided when the contract is signed.

Financing a property purchase includes :

• A total amountThis is intended to cover the entire operation (purchase of the property, renovation work, etc.).
• A financial contribution that you must provide to cover the costs associated with the purchase (notary fees, registration fees, bank charges, bank guarantee fees, etc.). It corresponds to 10% of total loan if you are buying a principal residence. The deposit must be 20% if you are buying to let in Luxembourg.
• A interest rate It sets the rate at which the bank earns interest on your loan. This rate is really important. Every month, you have to repay a sum of money on the outstanding capital. The higher the rate, the more you have to pay the bank. Given the high property prices in LuxembourgFor example, a difference of 0.1% or 0.2% represents tens of thousands of euros more in interest to be paid.
• A repayment period The faster you repay, the less interest you will pay, but the higher your monthly repayments will be. It is generally advisable to opt for longer loans, so that your monthly repayments are more bearable.

Special features of a home loan in Luxembourg

Property prices in Luxembourg are particularly high compared with neighbouring countries. They are close to property prices in Paris or London, with prices in excess of €10,000 per square metre.

Here are the special features of a mortgage in Luxembourg:

• Loans are taken out for an average of 30 years. In some cases, they can even extend to 40 years. This is much higher than in neighbouring countries (in France, loans are generally for 20 to 25 years).
• Rates are fixed and variable. This is an exception in Europe: it is possible, for the same loan, to have a lower fixed rate for 5 to 10 years, then a higher variable rate over the remaining repayment period. This is generally the right option if you are not planning to stay in your home for more than 10 years. On the other hand, if you plan to stay for 20 or 30 years, you should opt for a fixed rate.
• Interest rates are highly volatile. They can vary greatly from month to month and from bank to bank. That's why it's advisable to carry out several simulations with different banks.
• A tax credit of €40,000 per person is granted on the first purchase of a principal residence. This could reduce the bill by €80,000 for a couple buying their first home.
• European and international civil servants are easier to finance. These profiles, generally on fixed-term contracts, have no difficulty in taking out a long-term loan with a Luxembourg bank.

Conditions for obtaining a mortgage in Luxembourg

Here are the conditions for obtaining a loan easily in the Grand Duchy:

• You are in Contract for an indefinite periodIf you are a European civil servant or work for an international institution, you have a permanent contract, excluding the probationary period, or a fixed-term contract.
• La your monthly loan payment must not exceed 45% (maximum) of your monthly income
• You must provide a financial contributioncorresponding to 10% of the total amount of the transaction in the case of a purchase for a principal residence. This rate is increased to 20% of the sum if the investment is for the purpose of letting the property.

In some cases, you will not be required to provide a downpayment equal to 10% of the loan amount. However, your deposit must cover at least the costs associated with the purchase of the property.

How can I find the best finance for my property project in Luxembourg?

First of all, make sure you choose the right best rate for your home loan.

Make sure that the bank of your choice also offers good current account deals, without excessive charges. See our ranking of the best online banks in Luxembourg.

Determine your borrowing capacity by using a mortgage simulator. You can find one on the website of your bank or a broker. This will give you an idea of how much you could borrow.

Make an appointment with the bank of your choice using our comparator to find out exactly how much you could borrow at current rates. This will give you a precise budget. This will help you target your property search more effectively.

Once you've found the house or flat you want to buy, sign the preliminary sales agreement and contact your bank or broker again to apply for a mortgage.