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

If you're considering purchasing property in Luxembourg, navigating the realm of mortgages is a crucial step in making your homeownership dreams a reality.

Last time updated
26.03.24

Understanding the intricacies of mortgage loans, rates, requirements, and other essential details is paramount to securing favorable terms and avoiding unforeseen surprises. In this comprehensive guide, we'll take an in-depth look at the different types of mortgages and their rates, demystify the inner workings of mortgages in Luxembourg, provide a step-by-step process for obtaining a mortgage in this dynamic market, and shed light on the factors that can influence mortgage approval.

Mortgage types and available rates in the Grand Duchy of Luxembourg

To start, we'll explore the variety of mortgage types available and how they match different individual needs. We'll also analyze the current mortgage rates in Luxembourg, shedding light on the existing market conditions. By comparing current rates with historical data, our goal is to give you a thorough understanding that helps you make informed decisions.

Types of mortgages

In Luxembourg, the diverse range of mortgage options caters to various preferences and financial strategies. We can categorize mortgages based on the type of rate or the amortization method. 

What is amortization?

In simpler terms, amortization is how a mortgage loan's balance decreases over time. In the early years of a mortgage, payments are primarily interest; as time goes on, more of each payment is applied to the principal balance. This schedule ensures that the loan is fully paid off by the end of its term.

Amortization types
Rate types

Mortgage rates

In Luxembourg, mortgage interest rates remained notably low from early 2009 until late 2021. Variable rates, averaging 2.38% in 2009, steadily declined to 1.31% in 2021. Similarly, fixed rates followed a comparable trend, decreasing from 2.75% in 2012 to 1.20% in 2021. However, over the last two years, there has been a significant upswing.

In 2022 and especially in 2023, both variable and fixed rates experienced substantial increases, reaching 4.71% for variable rates and 4.10% for fixed rates in September 2023.

Interest rates mortgages in Luxembourg timeline, statistaics, rates
Source: Banque centrale du Luxembourg

The Banque Centrale du Luxembourg (BCL) publishes the latest mortgage rates monthly. To stay informed about market dynamics and track the evolution of interest rates in Luxembourg, we recommend regular visits to their website. Keeping a close eye on these trends will empower you to make informed decisions in the ever-evolving landscape of mortgage interest rates in Luxembourg.

Step-by-step guide to obtaining a mortgage in Luxembourg

A mortgage is a financial arrangement granted by an institution to facilitate the purchase of real estate. Key to understanding this process is the borrower's authorization for the bank to sell the property in the event of missed loan repayments.

Crucially, Luxembourg's legislation strictly regulates this practice. Despite authorizing the bank to sell the property if payments are not made, your home remains your property. The bank does not possess the right to enter without permission, dictate occupancy, or collect rent.

How it works?

While offering your home as collateral is a crucial aspect, it alone may not secure the loan. The bank assesses your financial situation, considering criteria such as monthly income, personal, familial, and professional circumstances, before approving your real estate project.

Key features of a mortgage include
Loan term
Ranging from one to 30 years, with some banks requiring a minimum of 10 years.
Payment frequency
Mortgage payments are generally made monthly.
Loan amount
Starting from 50,000 euros, the maximum depends. Banks avoid exceeding a 35% debt-to-income ratio.
Interest type
Can be fixed, variable, adjustable, or a mix, as explored in the previous section.

How to apply for mortgage in Luxembourg?

Now that we have a clearer understanding of how mortgages work in Luxembourg, let's jump into a step-by-step guide to getting one and navigate the intricacies of mortgages in Luxembourg with confidence.

For existing homeowners purchasing another property, an initial deposit is typically required. An intriguing alternative, especially if aiming for a 100% borrowed amount, is to consider a personal loan for the mortgage down payment. If you are interested in this option, we recommend that you take a look at our article dedicated to this topic.

Loan
Finances
Banking
Securing a personal loan in Luxembourg bank – step-by-step instruction
Read the article
Estimate how much you can borrow
Find the best available rates in banks
Prepare the required documents
Submit the application and sign the paperwork
faq

Frequently Asked Questions (FAQ)

How do mortgage interest rates in Luxembourg compare historically?

What factors influence mortgage approval in Luxembourg?

Should I use a mortgage broker services to find the best rates?

How can I estimate how much I can borrow for a mortgage in Luxembourg?

We took photos from these sources: Photo by Jessica Bryant for Pexels

Authors: Luz
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