What are the different loan options available?
By its very nature, the fixed-rate loan is unaffected by financial market fluctuations. As such, your loan is repaid in regular monthly amounts throughout its term. You therefore avoid any hidden surprises in the event of interest rate rises. In exchange for this security, the interest rate on this loan is generally slightly higher than that of the variable-rate loan.
Interest rate fluctuations on the financial markets, whether upward or downward, affect your monthly repayments. Tip! To limit any upward fluctuations, opt for a capped-rate loan.
This option allows you to keep a fixed rate of interest over three, five or ten years. At the end of this period, the interest rate will either be variable, fixed or revisable once again.
What is the loan term for a mortgage?
In theory, repayments can be spread over a period of up to 40 years. In practice, the loan term depends on your age and monthly budget.
What is the maximum monthly payment amount?
The amount of monthly loan payments for a household should generally not exceed a third of its permanent income. BIL advises you so as to define the monthly payment amount according to your income and what you are able to pay.
How can I secure my mortgage?
The usual guarantees are as follows:
Mortgage protection insurance.
This allows you to protect your relatives. In the event of the borrower’s death, the insurer covers the repayment of the capital outstanding to the lending institution.
First or second ranking mortgage.
The lending institution receives a security interest in respect of a building without the owner being dispossessed.
The borrower may voluntarily pay off their monthly loan payments by assigning a proportion of their salary to their creditor.
Joint and several guarantee.
A third party (or their heirs in the event of their death) undertakes to repay the debt in the event of the borrower’s default.
Which documents should I submit to apply for a loan?
The following documents are required:
provisional sale agreement signed by each party
land registry plan
proof of own funds (if they are not held in BIL accounts)
details of existing loans
your most recent pay slips
any other documents required to open your account and to approve the funding sought
Specific documents in the case of a new-build or renovation:
photos of the property (inside and outside) in the event of a renovation
plan, specifications or quotes in the case of a new-build.
What are the tax benefits?
Debit interest on mortgages
Debit interest for an owner-occupied home:
During the period when the property being built or renovated is not occupied: fully deductible
After this period: tax deduction capped according to the number of members of the owner’s household for tax purposes and the occupancy start date
Debit interest for a property rented out: fully deductible
Charges and commissions related to the loan (e.g. loan registration and notary fees attached to opening a credit line): fully deductible provided that you do not occupy your home at the time of paying these costs. Notarial deed fees related to the purchase of the property: not deductible
Mortgage protection insurance premiums
- Regular premiums: tax allowance of EUR 672 per year and per person within the household for tax purposes
- Single premium: the single premium is only deductible for the year in which the premium is paid, but it may be subject to an increased limit or higher increased limit that varies depending on your age, tax class and family situation.
Single premium increased ceiling
(*) For taxpayers aged 31 and over, the increased limit for a single premium is 8% x number of years over 30 at the time the insurance policy is taken out.
(**) For taxpayers aged 50 and over, the increased limit for a single premium is capped at EUR 9,600. BIL relationship managers will gladly provide information regarding possible tax deductions.
||Up to 30 years old
||31 - 49 years old (*)
||Over 50 years old (**)
||EUR 6 000
||+ EUR 480 / year
||+ EUR 9600
|Jointly taxed couples
||EUR 6 000
||+ EUR 480 / year
||+ EUR 9 600
|Allowance per dependent child
||EUR 1 200
||+ EUR 96 / year
||+ EUR 1 920
Les Responsables de relation BIL sont à votre disposition pour vous informer sur les possibilités de déduction fiscale.
What government incentives are available?
The Luxembourg government has a number of incentives for the construction, acquisition, renovation and conversion of housing by natural persons.
Several forms of incentive are available:
- direct capital aid
- energy efficiency improvement subsidies
- subsidies for rainwater harvesting
- interest subsidies for loan repayment, etc.
Find out more
Learn more about government household incentives and how to obtain them. BIL relationship managers are also able to advise you.