Thinking of buying a home in Luxembourg? From finding the right property, to making an offer, and taking advantage of tax credits, here's what to know.
Buying a home in Luxembourg is notoriously expensive, but so is renting, and in a lot of instances it may make sense to purchase rather than rent when your financial situation allows for it. This article will guide you through what you need to know about the process.
Home prices & finding a property
Comparing final prices for sold properties isn't quite as easy in Luxembourg as in some other countries, which puts you at a slight disadvantage as a buyer. You can get a decent idea by looking at the housing observatory's website, as they provide average final prices for flats and houses by commune. Unsurprisingly, you will note that prices go up the closer to the City you look.
In terms of finding a property, the easiest way to get an overview of what's on the market it to check one of the aggregator websites, like athome and immotop. Alternative you can check agencies individually - editus provides a good overview - but prepare to spend a lot of time on websites of varying quality if you go down this route.
When you've found 'the one': making an offer
Once you've found a property that ticks all your boxes, it's time to make an offer. That happens much the same way here as it does elsewhere, in that you make an offer to the agent (or seller, if it's a private sale). If they're happy with your offer, they'll draw up a sale agreement, which is better known under its French name: compromis de vente.
What's really important to note here is that signing the compromis is not something that should be taken lightly. As Guichet put it, "a sales agreement constitutes a sale." For all intents and purposes, you are committing to buy the property (and grounds) as stated on the agreement, at the price specified.
Once you've signed, you can't change your mind without paying a penalty, which usually sits around 10% of the agreed price - given housing prices here, that's going to hurt your savings account. If you're committing to buying a property at €900,000, for example, the penalty for pulling out could set you back €90,000. That's enough to buy a summer house in Sweden. As such, make sure that all of the details of the object are included: the house itself, and any garages, fixtures, and land.
The only 'free' way to pull out of the sale at this point is if your mortgage application is declined, in which case the agreement is void and you're not liable for any fees.
All of the major consumer banks in Luxembourg will offer mortgages, and as in any country it's a very good idea indeed to get at least two offers before you commit to one, as you may be offered different conditions and interest rates. Even a small difference in interest can make a pretty substantial difference in terms of the final amount you spend on your home, so don't rush this step.
The rate you're offered will take into account your credit history, contract type, income, etc. Generally speaking, your monthly mortgage cost shouldn't exceed a third or so of your net (take-home) income.
It is of course a good idea to check what your borrowing capacity is before you even set about looking for properties, to get an idea of budget and what the monthly cost will be. All of the major banks have online calculators, which you can access here: BCEE/Spuerkeess, BGL BNP Paribas, ING, BIL, and Raiffeisen.
Good news - tax credits & financial aid
Buying a home in Luxembourg can be daunting for us mere mortals, with property prices being what they are. The good news is that the government offers a credit on registration fees. The fee usually sits at 7% of the purchase cost, and the credit is capped at €20,000 per buyer, so a maximum of €40,000 for a couple.
On top of that, there's financial aid for first-time buyers. The amount varies (€250-9,700) depending on your situation, and is only available for first-time buyers of a primary residence (not buy-to-let). You also have to stay in the property for ten years, otherwise you'll have to reimburse the subsidy.
Sales should be made through a notary, who have exclusive jurisdiction to prepare documents for the change of ownership of properties. The notary plays several important roles in the process, as they perform background checks on the seller to confirm their ownership status, as well as outstanding mortgages, charges, etc.
Before you head to the notary as a buyer - and on the same day - you need to set an appointment with the bank, who draw up papers confirming that you have sufficient funds to meet the sales agreement. Prepare for this process to take a full day, and make sure your appointment with the bank is early in the morning - they'll guide you through this, mind.
You can find a list of notaries here.