How do I renegotiate my mortgage in Luxembourg?

Renegotiating your mortgage can save you tens of thousands of euros over the lifetime of your loan. This is particularly the case in Luxembourg, where the amounts borrowed are very high, and where every percentage difference in the loan rate has a considerable impact. Here's how.

When should you renegotiate your mortgage?

To renegotiate your loan rate, you need to be in the right circumstances. It makes sense to renegotiate in the following situations:

• Because market rates have fallen significantly. If market rates have fallen by at least 0.7 to 1 point compared with your current rate, renegotiation becomes financially attractive.
• Because you have a variable rate and want to switch to a fixed rate: variable rates have soared since 2021-2022. You can renegotiate a fixed rate to guarantee stable monthly payments.
• Because your situation has improved significantly: if your financial situation is better (salary increase, permanent contract, promotion), banks may reassess the risk and offer you better conditions
• Because you are changing your asset strategy: you can choose to reduce the term of your loan to pay it off sooner, or increase the amount to include energy renovation work

In any case, before anything else, consult the current rates to get an idea of the market. Depending on the outcome, you may choose to renegotiate your loan (or not).

If you want to renegotiate your rate, here's how:

How do I renegotiate my mortgage in Luxembourg?

Follow these steps to maximise your chances of renegotiating your rate on the best possible terms:

1. Negotiate with your current bank

As a courtesy, always start by asking your current bank. In Luxembourg, banks focus on customer loyalty. This could work in your favour.

Prepare your renegotiation file with :

• Your bank statements for the last 6 months showing sound management of your finances
• Proof of changes in income (new payslips, bonuses, promotion)
• A comparison of current rates on the Luxembourg market (which you can consult at our comparator or on the Luxembourg Central Bank).
• Simulations of potential savings

Highlight your customer profile:

• Make the most of your long-standing relationship with the bank
• Highlight the products you have taken out (insurance, savings, multiple accounts) and those you could take out if you renegotiate (retirement provision, complementary health insurance…)
• Remember that your payments are regular and always made without incident (if that is the case...!).

2. Use the competition

If your bank refuses or offers inadequate terms, then ask the competition.

All Luxembourg banks are very active in terms of loan renegotiation. It's an opportunity for them to attract new customers. So it's strategic.

A word of advice: rather than going to every bank, use a specialist broker. (see our mortgage rates page in Luxembourg). A broker will be able to compare all the Luxembourg banks quickly on your behalf. The service is free (brokers are remunerated by the banks via referral fees).

For some banks, this means they can obtain rates that would be impossible to obtain without using a broker.

But if you like to negotiate yourself, you can also go and see the banks directly and compare their rates.

3. Calculate the profitability of the operation

Renegotiating your interest rate is not always a good idea, because renegotiation involves additional costs. The potential gains must therefore far outweigh the costs incurred.

Here are the costs to be expected:

• Application fee from the new bank: €500 to €1,500
• Mortgage release fee: €300 to €800
• New guarantee fee: 0.5% to 1% of capital borrowed
• Early repayment penalties (if applicable)

A rate reduction of at least 0.7 points is said to make the operation profitable for a capital outstanding of more than €200,000.

What you need to know about renegotiating your credit in Luxembourg

There are a number of special features that give you extra leverage when renegotiating your mortgage in Luxembourg:

Negotiate with ancillary products

Banking and insurance products are very profitable in Luxembourg. That's why banks often offer packages for newcomers (current account, home insurance, etc).

If you want to renegotiate your mortgage rate, use this lever. Suggest to your bank that you take out a range of additional products (pension savings, home/car insurance, outstanding balance insurance with the bank, etc).

As these are highly profitable products, it will be easier for the bank to reduce the mortgage rate (which is generally considered to be a loss leader for banks).

Optimise the tax treatment of your loan

Don't forget that the interest on your loans is partly deductible from your tax return.

Deduction of loan interest : Check that your new offer allows you to continue to deduct up to €4,000 per person in the tax household. Certain loan terms may affect this deductibility.

Loan insurance : Renegotiate your outstanding balance insurance at the same time. The savings can be substantial, particularly if you opt for a single, tax-deductible premium.

Anticipating macroeconomic trends

The market moves very quickly. Watch out for changes in monetary policy by the US Federal Reserve and the European Central Bank.

If one or more rate cuts are planned in the next few months, it would be better to wait a little and take advantage of the new conditions. than to embark on a renegotiation straight away.

So keep an eye on financial assistance for energy renovation. You could take advantage of this to improve the energy rating of your property and thus reduce the rate of your loan (some banks offer to reduce the rate by 0.1 or 0.2 points if you improve your property by at least 2 energy ratings).

The best time to renegotiate your loan

Timing has a huge influence on the effectiveness of your renegotiation request! Banks are more or less receptive to renegotiation requests at different times of the year.

Highlights :

• At the beginning of the year : banks are more receptive to achieving their commercial objectives - they have credit allocated and can make gestures
• After 2-3 years of repayment : you've proved your solvency without paying too much interest, so this could be a good time to renegotiate (but be careful to take into account the charges that may apply if you have a fixed or variable rate)
• Before the ECB announces an increase in key interest rates: This could be a good opportunity to seize the last chance (and the bank may be receptive if you're a good customer).

Periods to avoid:

• At the end of the year : the teams are less available, the funds have already been used up and the objectives already achieved. There is generally less flexibility (unless a bank has not met its targets and needs to do so quickly).
• In times of major economic instability : This was particularly the case in 2022 with the war in Ukraine. The banks were in a wait-and-see position for almost 2 years, unwilling to commit themselves. It was difficult, if not impossible, to renegotiate during these periods.
• If you are planning a career change within 6 months: the bank will ask you for new documents relating to your employment. If you change, they won't accept until you're out of your trial period.

Renegotiating a mortgage in Luxembourg requires careful preparation, but can also generate considerable savings. Don't hesitate to enlist the help of a professional to optimise your approach and obtain the best conditions on the market.

You can also estimate how much your loan would cost at current market rates: free simulator here.