Mortgage in Luxembourg: requirements, rates and guide to obtaining a loan

In Luxembourg, the most prevalent mortgage type is the amortizable mortgage, where monthly payments are divided into two parts: a portion of the borrowed capital and the loan interest. On the other hand, non-amortizable mortgages function differently. In these, the monthly payments cover only the loan interest, and the repayment of the borrowed capital is deferred until the final installment.

Understanding these mortgage types empowers you to align your choice with your financial goals and risk tolerance. There are several types of rates available for mortgages in Luxembourg.

The initial step in the mortgage application process involves estimating how much you can borrow, a calculation primarily based on your income. Generally, mortgage payments shouldn't exceed 35% of income, though some banks may allow up to 45%. Some banks offer a mortgage capacity calculator to help you with this task.

The Commission de Surveillance du Secteur Financier (CSSF) further regulates borrowing percentages based on your homeowner status:

• First-time buyers are eligible to borrow up to 100% of the property's value;
• Non-first-time buyers can borrow up to 90%, necessitating a minimum 10% deposit. Some flexibility exists, with lenders offering higher borrowing levels on 15% of mortgages;
• Buy-to-let investors can borrow up to 80%, requiring a 20% deposit.

The next crucial step in securing a mortgage is finding the best rates, and you have two primary options. The first involves conducting your own search across various financial institutions making a mortgage comparison. Alternatively, you can enlist the services of a mortgage broker.

Personal research with mortgage calculators

Banks and credit institutions typically offer mortgage payment calculators, allowing you to customize loan parameters such as amount and duration. This tool provides an initial insight into loan costs, helping you eliminate excessively expensive options.

Once you identify entities with reasonable rates, perform a comprehensive loan simulation tailored to your financial reality. Understand specific requirements and necessary documents by each bank. The simulation process involves filling out a form with questions about the loan and personal information, accessible through a link next to the calculators.

Notable financial institutions in Luxembourg include BGL, BIL, and Spuerkeess.

Mortgage brokers services

While less common in Luxembourg than in other countries, mortgage brokers can secure more advantageous interest rates by exploring both major banks and smaller credit entities.

Now you are probably wondering: should I use a mortgage broker? Generally, it's a good idea. Their expertise can be invaluable, especially if you're unfamiliar with the Luxembourgish mortgage system. Importantly, they are typically remunerated by credit institutions, so their services often come at no cost to you.

The subsequent step in the mortgage application process is gathering the necessary documents. Typically, you'll need:

• Passport or ID card;
• Proof of residence, such as recent gas or electricity bill;
• Income proof. For employees, photocopies of the last three pay stubs; for self-employed and pensioners, a photocopy of the last tax assessment.
• Amortization schedules for existing loans, if you have them. This aids the bank in assessing your debt-to-income ratio.
• Land Registry information, overall property price, and price per square meter you plan to pay.
• While not always required, some banks may request authorization to claim against your employment income if mortgage repayments are missed.
• Specific document requirements may vary among institutions, and these details are typically communicated during the full simulation process.

Ensuring you have these documents ready streamlines the mortgage application, expediting the approval process. Stay organized and prepared as you move closer to securing your mortgage in Luxembourg.

The final step involves submitting your application along with all necessary documents and, once approved, signing all required paperwork.

Some banks offer convenient online application forms, while you can also visit the bank in person, consult with an advisor, and directly submit all required documents. Alternatively, if you've engaged the services of a mortgage broker, they handle the entire process, guiding you through and requesting the necessary documents.