Financing your project

1. The project & tips

  • 1.1. Buying an apartment in a residential complex off-plan

    Step 1

    You sign a deed of sale of property off-plan which provides that the total price is paid in instalments, based on the progress of works.

    This type of contract is governed by the laws of Luxembourg.

    Step 2


    The promoter is required to offer you a completion guarantee, which will be annexed to the notarial deed of sale and registered with him.

    Through this guarantee, a bank undertakes to pay the sums necessary for the full completion of the construction in accordance with the terms of the contact, should the seller not fulfil his completion obligation.

    The bank may replace this completion guarantee by a repayment guarantee. In that case, it undertakes to repay the buyer the instalments paid by the latter.

    Step 3

    Besides the deed of sale, you also sign the co-ownership deed, which specifies the common areas.

    The Co-ownership rules define the rules for joint living conditions among the co-owners.

    When you receive your new accommodation, a delivery report mentioning any shortcomings and defects is drawn up. By countersigning this report, the builder undertakes to carry out the necessary works at the earliest.

    The ten-year guarantee given by the builder covers the building against latent defects for a period of 10 years as from the delivery of the apartment.

  • 1.2. Buying an existing house or apartment


    The opinion of a building expert can also be useful to estimate the value of the building, detect latent defects (cracks, humidity) and estimate the costs of repairs to be carried out.

    When you have found a suitable house or apartment, you can sign a pre-contract.

    If the buyer finances the purchase of the property through a loan, it is usual practice to add to the pre-contract a suspensive clause providing for the outright cancellation of the pre-contract if the necessary funds are not obtained from the bank.

    Some renovation or transformation works may be vital.

    In that is the case, do not forget to apply for the necessary permits at the local Authority.


  • 1.3. Choosing a suitable land for construction
    1. Is it really a building land, with an authorisation to build issued by the Administration des Ponts et Chaussées (Ministry of Public Works) which is necessary for alignment of the house.
    2. You need a building permit, issued on the basis of the architectural plan by the Local Authority.
    3. Are the basic connections such as sewer, water, electricity, telephone and gas (if applicable) available?
    4. Does the land include hidden easements, such as a passage, spring, municipality pipeline?

    The Local Authority, the Land Registry, your notary and your architect can give you the answers to these questions.

  • 1.4. Building a detached house

    If you wish to personally handle the various phases of the project, customised construction provides you with a wide range of possible interventions.

    Your architect designs a pre-project taking into account your tastes as well as your financial capacity.

    He also prepares a detailed description giving precise specifications on interior and exterior finishes, installations and materials to be used.

    Once the final project is agreed, the architect gives you a detailed plan and plans the various construction phases.


    It is your responsibility to launch calls for tender for the different categories of tradesmen, to assess their proposals and to choose the companies to undertake your project.

    Your architect can help you find the most competitive and the most competent construction company, with references that can be verified.

    In order to relieve you of the responsibility and the conduct of the works, you can choose the option “turnkey house”.

    The construction company coordinates and supervises the works, and guarantees that deadlines and the quality of services are met.

    Along with the builder, you sign a purchase contract or a construction contract along with a specifications document describing the works to be undertaken.

    If the cost of your house is to be paid in instalments, you have the right to request a bank’s financial guarantee from your builder.

    Through this guarantee, the bank undertakes to pay the sums necessary for the full completion of the construction, should the seller not fulfil his completion obligation.

    On the day of handover of the keys, you sign with the builder a report of delivery of the house, which records the end of works and their compliance with the description.

    A ten-year guarantee covering the entire works against latent defects over a period of 10 years is given to you by the builder. It starts on the date of delivery of the house and must be mentioned in writing in the report of delivery.


2. Home Loan: Interest rate and duration

  • 2.1. General explanations
    • A home loan is a loan to buy a property: building land, apartment, house, etc.
    • It is often in the form of a mortgage loan (a loan with a mortgage)
    • By mortgaging a property, the subscriber pledges a property (generally the property for which the loan is requested), which is the guarantee for the institution lending to the borrower
    • This pledged property is recorded in the mortgage registry and the lender (the lending institution) retains a right of priority of repayment if the borrower were to sell his property to settle his debts
    • Interests represent the cost of the home loan and therefore the remuneration for the lending institution.
  • 2.2. Types of interest rates

    Variable rate

    • The financing method most used in Luxembourg
    • Updated on a frequent basis to reflect changes in market interest rates
    • Also offers the possibility of making additional repayments and thus reducing the term of the loan
    • Not very risky since the rate is the market rate

    Revisable fixed rate

    • The interest rate is generally fixed for a period of 3, 5 or 10 years
    • During this period, the rate remains unchanged. The borrower thus knows the exact amount to be repaid and is protected against any increase in interest rates until the next revision of rates
    • At the end of the chosen period, the interest rate is revised and can again be fixed for a specified period or replaced by a variable rate

    Long term fixed rate

    • The rate is fixed at the signature of the contract for the entire contract period (generally 15 or 20 years)
    • Advantage: the exact amount of repayments is known in advance
    • Disadvantage: the borrower is protected against any increase in market rates, but does not get the benefit of any decrease in these rates

    Possibility of taking up a loan with the interest rate partly variable and partly fixed in order to balance the risk.

  • 2.3. Term of the home loan
    • The term can vary depending on the borrower’s choice and his repayment capacity
    • It can also vary depending on the type of property to be financed
    • In the case of variable rates, the term can also be reduced through earlier repayments
    • In Luxembourg, the most common term for a home loan is 20 years
    • Financial institutions increasingly tend to extend the term of home loans to make them more accessible to their clients
    • Some financial institutions propose a term of 20 to 30 years
    • Some banks extend the term of home loans up to 40 years subject to certain special conditions

3. Financing Plan

  • 3.1. The financing plan helps the buyer to properly decide on the amount to borrow.

    In fact, the difference between, firstly, all expenses to be incurred for the purchase or the construction of the dwelling and, secondly, all the various sources of financing available to you, will be equivalent to the amount to borrow.

    To help you draw up a financing plan for your property project, you can use the following table in which we have included the expenses to be borne and the financial resources that you may have.

    Cost of land
    Prices of construction / acquisition
    Costs of development and transformation
    Notary fees
    Mortgage deed fees
    Architect's fees
    Premium on outstanding balance insurance*
    Incidental expenses
    Savings/personal funds
    Funds from a housing savings scheme
    Income from life insurance
    Sundry funds
    Premiums granted by the State
    Premiums granted by the Local Authority
    VAT refund

    The formula to calculate the loan required for the construction / purchase of your dwelling:


    The insurance outstanding balance allows you to insure a given capital in the event of death during a specified period. For a home loan, if the insured dies during this period, the insurance company undertakes to repay the outstanding loan balance to the beneficiary. The family is protected from the financial charges relating to the loan in the event of death of the insured.

4. Refunds and Guarantees

  • 4.1. Repayment
    • The loan amount
    • The interest rate
    • The financing term

    In principle, repayment starts as from the grant of the home loan. However, most lending institutions allow the borrower to start repaying after a period of use to be agreed upon this is the deferred capital repayment.

    Thus, if you have purchased a dwelling for which the construction or renovation is not yet completed and you are still paying rent for your current accommodation, you refund only the interests due over that period until you move house. The “normal” monthly payments are only paid as from the time you move house.

    Take one third (33%) of your permanent income as a benchmark to make a good decision on the part of your budget to be allocated to monthly repayments of your home loan.

    Do you wish to ensure that your budget is balanced? Maintain a suitable standard of living, taking into account your permanent income and your fixed expenses.

    Example of calculating disposable income and repayment capacity

    The repayment capacity recommended in this example is:

    Monthly disposable income (5 756.00 €) x 33 % (i.e. one third of your income)
    = 1,899.69 €
    Net monthly income of husband (after taxes)
    Net monthly income of the wife (after taxes)
    + Family allowances
    + Other fixed income (after taxes)
    3,000.00 €
    3,000.00 €
    185.60 €
    0 €
    TOTAL INCOME 6,185.60 €
    - Current monthly expenses (current loans, insurance premium…) 429.00 €

    This difference must not exceed +/- a third (1/3) of the monthly disposable income to ensure a decent standard of living.

  • 4.2. Garanties

    The grant of a home loan is subject to certain basic conditions as well as guarantees required by the lending institution.

    • The lending institution requires a personal contribution from the borrower (10 to 25% of the total cost) based on his personal situation and his repayment capacity. Generally, the bank is not willing to finance, for instance, costs which do not add to the property’s value, such as the insurance premium, mortgage fees, etc.
    • In some cases (if the borrower’s repayment capacity is largely secure and the risk of default is limited), it is possible for the lending institution to finance the total cost of the loan.
    • Thanks to the mortgage, the property is itself pledged to the lending institution, which reserves the right to offer the property for sale if the debtor no longer has the capacity to repay his loan. However, this is an extreme measure, only applied if there is no other solution.
    • The lending institution generally also requires an outstanding balance insurance, which covers the balance to be repaid in the event of the borrower’s premature death.
    • The lending institution requires the subscription to a fire insurance (generally free of charge) during the property’s construction period
    • Other guarantees that may be considered are as follows:
      • Assignment of salary
      • Mortgage on another property
      • Pledging of an investment portfolio account
      • Bank guarantee
      • Pledge of a life-insurance policy
      • Guarantee from another bank or endorsement of a third party
      • etc.