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The legal limits on borrowing
Since 1 January 2021, lending for residential property in Luxembourg has been subject to loan-to-value (LTV) limits introduced by the financial regulator, the CSSF, on the recommendation of the Systemic Risk Committee. The loan may not exceed a set share of the property's value:
- First-time buyers of a principal residence: up to 100%.
- Other buyers of a principal residence: up to 90%, with limited flexibility for banks to go higher in some cases.
- Other purchases, including buy-to-let: up to 80%.
These are ceilings, not entitlements. A bank may decide to lend less, depending on your profile.
In practice a 100% loan covers the price of the property, not the purchase costs. You will usually still need your own money for registration duties that are not covered by the Bëllegen Akt, notary fees and the costs of the mortgage deed.
How much you need of your own
Start with the price, then add the costs.
- Registration and transcription duties of 7%, often largely or fully offset by the Bëllegen Akt tax credit for a principal residence. See our guide to registration duties and the Bëllegen Akt.
- Notary fees for the purchase deed.
- Mortgage deed costs, including its own fees and registration.
- A reserve for moving and furnishing.
A first-time buyer purchasing a €500,000 apartment with a 100% loan, and a Bëllegen Akt that covers the duties, may therefore still need a few percent of the price in cash for notary and mortgage costs. A second-time buyer limited to 90% needs at least €50,000 plus costs. A buy-to-let investor at 80% needs €100,000 plus costs.
What banks look at
Income and stability
Banks want to see regular income that will continue. A permanent contract (CDI) past its trial period is the strongest case. Fixed-term contracts, recent arrivals and self-employed income are all financeable, but expect more questions and possibly more documents.
Affordability
Banks compare your monthly loan repayments, plus other debts, with your net income, and look at what remains to live on. There is no single legal ratio, and each bank has its own policy, but a total debt burden well above a third of net income usually needs strong compensating factors.
Your savings and history
Savings show discipline and provide the reserve for costs. A clean record on existing loans matters, including loans abroad.
The property
The bank will value the property. For an apartment, it will look at the co-ownership, the energy class and the location. A poorly insulated home may be financed on different terms from a new one.
Fixed, variable or mixed?
Luxembourg banks offer three broad kinds of rate.
- Fixed rate: the rate is set for the whole loan or a long period. Payments are predictable.
- Variable rate: the rate follows a market reference, usually reviewed periodically. Payments can rise or fall.
- Mixed or "revisable" rates: fixed for an initial period, then variable or refixed.
There is no right answer. The choice depends on how long you intend to keep the home, how much margin your budget has, and how much uncertainty you are comfortable with. Ask each bank to show the total cost over the loan, not only the first monthly payment.
Loan duration
Luxembourg banks commonly lend for long durations, often up to around 30 years for a principal residence, subject to your age at the end of the loan. A longer duration lowers the monthly payment and raises the total interest paid.
Insurance
Banks usually require:
- home insurance covering the property;
- a life or death-and-disability insurance linked to the loan, often a "solde restant dû" policy covering the outstanding balance.
Compare the insurance offered by the bank with independent offers. The difference over the life of the loan can be significant.
State aid for buyers
The Housing Ministry manages several forms of aid for buyers of a principal residence, including interest subsidies and a State guarantee for borrowers who lack sufficient security, subject to income and property conditions. They are worth checking before you sign, because some must be requested at a specific stage. Guichet.lu has the current list. For renters, see our guide to State help for tenants.
Preparing a strong file
- Identity documents and proof of residence.
- Employment contract and the last three to six payslips.
- Tax returns if self-employed or if you have other income.
- Bank statements showing savings and regular expenses.
- Details of existing loans, in Luxembourg and abroad.
- The compromis or reservation contract, the plans and the energy certificate.
Approach two or three banks. Terms differ, and a written offer from one bank strengthens your discussion with the others.
Timing with the compromis
In Luxembourg, the compromis de vente commits you to buy. Make sure it contains a financing condition with the amount, rate and deadline you need, typically four to six weeks. Our guide to the compromis de vente explains why this is the most important clause in the process.
Our take
Luxembourg is one of the few markets in Europe where a first-time buyer can borrow the whole price of a home, and competition between banks is real. The risk is to treat a 100% loan as a 100% solution. Budget the costs, compare total cost rather than headline rate, and put a proper financing condition in the compromis.
If you are starting a search, see our properties for sale and our guide to the buying process.
Sources
This article describes general rules and market practice in Luxembourg and is not legal, tax or financial advice. Rules and announced measures change; confirm the position that applies to you with a notary, your bank or a tax adviser before signing.
