For many of us, buying our first home is an important milestone. Before jumping into the housing market, it’s best to read up on the process.
Becoming a homeowner is no small feat. It requires careful planning. Before you start looking for a house or apartment, it’s vital that you set your budget:
By doing this, you’ll protect yourself against potential disappointment and avoid wasting time looking for a property that won’t match your investment capacity. You’ll also avoid your mortgage application being rejected after you’ve already signed a sales agreement.
In order to determine your budget and prepare a financing plan for buying your first home, we suggest that you estimate your borrowing capacity in just a few clicks using our online calculator, or pay us a visit at your local branch.
The amount you’ll be allowed to borrow will depend on your down payment, your income and any outstanding loans you may have. Ideally, to obtain a home loan, your remaining income should enable you to maintain a comfortable standard of living. In order to determine your mortgage repayment capacity, your advisor calculates the ratio between all of your recurring expenses, including monthly loan repayments, and your total income.
In addition to your budget, you’ll also need to define the main search criteria for your future home:
In fact, more than 67% of Luxembourg households own their homes. Luxembourg residents all seem to dream of owning their own property.
Now that you’ve defined your budget and search criteria, it’s time for you to start looking for your new home. You might do this through:
When you go to a viewing, check the condition of the plumbing and electricity, check for damp, insulation, etc. Feel free to bring an expert with you for advice, too. Don’t forget to pay attention to the property’s surroundings: noise pollution, nearby schools, shops and public transport.
You’ll often need to attend multiple viewings before you find the perfect place. But you’ve found it at last – your dream home! Before buying, there are still a few formalities to get through. The first includes signing the sales agreement, and appointing a notary to draw up the final deed of sale once the initial agreement has been signed.
Once the agreement has been signed, you’ll then need to head back to your bank to obtain a mortgage offer. This includes the repayment term and the type of interest rate for your loan (fixed, variable or adjustable fixed rate). To ensure that your bank offers you a suitable financing solution, you’ll need to provide various documents:
The bank may request additional documents depending on your profile and plans.
To give yourself the very best chance of obtaining a home loan under the best conditions, be sure to prepare your file properly, pay off any consumer loans and avoid going into overdraft.
The bank will send you a loan offer based on your application. You’ll then have 14 days (for fixed-rate loans) or 30 days (for variable-rate loans) to decide. Once the offer has been signed, you need to provide this information to the notary and let your current landlord know. The bank will then give instructions concerning the mortgage to be taken out on the property, so that the notaries can prepare the deeds.
Most home loans come with a mortgage. A mortgage is a guarantee that enables the bank to seize the property should you be unable to repay your loan
Head to the Luxembourg Chambre des Notaires website for a list of all the notaries active in the country
The sales agreement is a contract by which the two parties, the seller and buyer, agree to enter into the sale of the property at a set price. This agreement may need to be registered and authenticated by a notary. Given the binding character of this document, it would be best to add a conditional clause in case you haven’t yet obtained your bank’s approval for a home loan.
Becoming a homeowner is a serious commitment, both financially and emotionally. This is why it’s important to safeguard your investment and your new property.
To protect yourself and your home, the bank asks you to take out two types of insurance for a mortgage:
The end is in sight: you’re about to buy your first home! The only thing left to do is sign the deeds at the notary’s office, so that the property is transferred from the seller to the buyer.
A few days before signing, the notary will call for funds from the bank. You must authorise your bank to pay the required amounts to the notary’s office.
The price depends on the amount of the loan plus 10% in most cases, to cover any costs that the bank may incur in case of default. The amount paid corresponds to the property’s purchase price plus the notary’s fees. To buy a property, you’ll need to pay registration and publication fees, calculated on the basis of the price of the property purchased. The standard rate is 7%. The reimbursement of expenses incurred by the notary as well as their fee also make up the cost of the deed of sale. This deed of sale is usually accompanied by a mortgage deed. However, this cost item can be reduced thanks to the €20,000 tax credit per buyer, granted by the government as part of the Bëllegen Akt.
Congratulations on becoming a homeowner! Once all of the administrative formalities are complete, you’ll be handed the keys to your new home.
Having savings is key if you want to become a homeowner. The more you’ve managed to save, the better the conditions of your mortgage. At BGL BNP Paribas, we analyse your project as a whole, adapt to your situation and work with you in order to find a solution that will allow you to make your purchase. In most cases, before granting you the loan, banks will ask you for the necessary capital to cover incidental costs, and to make a down payment of at least 10% of the price of your future property.
