What are the roles and responsibilities of a broker in regards to home financing?
According to a law passed on the 23rd December 2016, the Luxembourgish government has started to structure the profession of home financing, mortgages and brokers. But, what exactly is a broker?
The business of a broker
A broker is an intermediary between borrowers and lenders. They are enquired by customers looking for a financing, and contact their lending partners - usually banks - to find the best offer. Depending on the broker, the service is often free of charge. In such cases the broker is actually paid by the bank for its services. No matter who pays, you have the right to be informed about the amount they receive and how they are paid for your mortgage.
People usually resort to brokers to:
- Simplify the process of talking to many banks, as the broker becomes a single point of contact moving requests forwards to multiple lenders.
- Ensure that they are getting the best rate they can.
But with so many financing options available out there, brokers are also the right people to turn to get a clear explanation of the inner workings of mortgages.
A few things that make mortgages complex in Luxembourg
Variable rates are often misunderstood and a broker might help you understand their impact. Combining variable and fixed rates can also be an opportunity to get a financing matching your project and your risk profile.
Taxes are not neutral. You can leverage your insurance premium payment options and home saving schemes. Home saving schemes introduce extra complexity ; initially designed to help build up a down payment, they can also be used as a means of financing when buying. They offer another mix between variable and fixed rates.
If you still find it too simple, let’s now consider that you are willing to pay back a mortgage in advance. In such case, the closing costs are lowered for a primary residence, but can be quite higher if it is an investment.
More professionals on the market
With the law of the 23rd December 2016, the profession is now regulated by the CSSF, and it has led to a smaller number, but more structured players among which AtHomeFinance, born from the buyout of Crédit Expert by AtHome in 2018, and Nexfin, a more recent entity spun off from the real estate agency Nexvia.
Nexfin also offers an online calculator [Link: https://www.nexfin.lu/mortgage-simulator] that allows you to calculate the exact cost of each financing option: fixed, variable, revisable and home saving schemes.