Property Finance

The mortgage file a Luxembourg bank actually assesses

Three constraints decide whether a purchase is financeable here, and only one of them is a legal rule. Knowing which is which changes what you prepare and what you can negotiate.

The one rule that is genuinely binding

Loan-to-value is set by CSSF Regulation 20-08 of 3 December 2020, adopted on the recommendation of the Comité du risque systémique, which itself followed a European Systemic Risk Board recommendation to Luxembourg on household indebtedness and house-price growth.

The general principle is a maximum 80% loan-to-value for any credit, including buy-to-let. Lenders are permitted to apply differentiated limits, and in practice: first-time buyers acquiring a principal residence can be financed up to 100% of the price, other principal-residence purchases are generally capped at 90%, and buy-to-let remains at 80%.

Two clarifications that matter. The percentage applies to the price, not to the cost of acquiring, and acquisition costs are normally excluded from the financing and must come from your own funds. And exceptions above these limits exist but are tightly controlled and apply to a small share of lending, so they are not something to plan around.

The two constraints that are practice rather than law

The debt-service ratio commonly quoted around 40% of net income is a banking convention, not a legal requirement. Lenders reason at least as much in terms of remaining disposable income, which is why two households with identical ratios can receive different answers.

On top sits a stress test, applied so that the loan is sized against a rate materially higher than the one you are offered. Two consequences follow. A very long term improves the headline ratio less than borrowers expect, because the test bites on the stressed rate. And existing commitments count in full, which is what most often surprises applicants moving from a first purchase to a second.

The energy class, now part of the credit decision

The passport used to describe running costs. It now shapes the file.

For an applicant this means an unquantified renovation attached to a poorly rated property is a file the bank cannot assess. Bring a works estimate broken down per trade rather than a single global figure, because a total cannot be interrogated and a per-trade breakdown shows where the uncertainty sits.

In an apartment, add a further consideration: the envelope is largely common. The facade and often the windows belong to the co-ownership, and improvement works require an absolute majority of all millièmes, present or not. A buyer cannot promise a lender an improvement that depends on a vote.

What to bring to the first appointment

• Employment contracts and recent payslips for every borrower, with a Luxembourg open-ended contract carrying materially more weight than a high figure on a fixed term.
• Bank statements and a clear statement of existing commitments.
• The property: price, habitable surface stated separately from terrace and cellar, energy passport, floor and lift.
• The building: reconciled charges for two completed years, the balance and annual contribution of the fonds de travaux, and the minutes of the last three general assemblies.
• The works estimate per trade, and your intended contingency.
• Your Bëllegen Akt position: whether each buyer is eligible and how much of their personal, lifelong €40,000 allowance remains.

The credit and the guarantee, which change the cash requirement

The Bëllegen Akt is a tax credit on the registration and transcription duties of €40,000 per buyer, €80,000 for a couple acquiring together, permanent since July 2025 and applied by the notary at the deed with no separate application. It requires personal occupation as principal residence from entry into possession or within two years, leaves a €100 minimum in duty payable, and any unused balance stays available for a future principal residence. To combine two credits the deed must record a joint acquisition en indivision.

Separately, the State housing guarantee under the amended law of 25 February 1979 exists for eligible first-time buyers, subject to household income conditions and to occupation as a principal residence, and is applied for through the Ministry of Housing. Interest subsidies and savings premiums operate under their own conditions.

None of these reduce the notary's emoluments, disbursements or mortgage costs, which remain payable even where the credit absorbs the duties entirely.

Sequencing, because the offer is binding

An accepted offer in Luxembourg leads to a compromis de vente, a binding contract rather than a preliminary step. Put the specific property to the bank before offering, not after: this price, this energy class, this works estimate, this loan-to-value position.

Then ensure the financing condition in the compromis is drafted by the notary with a realistic deadline, a stated amount and a stated rate. It is the mechanism that protects you if the lending does not come through, and a vague clause protects nobody.

Three questions we are asked

Fixed or variable? Fixed rates in Luxembourg can run over long terms and are the common choice for principal residences, precisely because prices are high and terms are long. Variable exposes you to the same rate movement the stress test is designed to survive. The right answer depends on your capacity to absorb an increase rather than on a forecast.

Do non-residents face different limits? Lenders generally apply a more rigorous analysis and the practical loan-to-value available tends to be lower. It is a question for the specific bank rather than a general rule.

Is a general pre-approval enough to make an offer? No. It says something about you and nothing about the property, and with an F to H energy class the property is now part of the credit decision.

What strengthens a file, beyond the numbers

Three things move a lender's assessment that are within your control and are not ratios.

Contract durability. An open-ended Luxembourg employment contract answers the question the bank is actually asking, which is whether the income persists. A higher figure on a fixed term does not answer it as well.

A visible reserve after completion. A file that leaves cash in place is a stronger file, not merely a safer one, and it is visible on the statements you are already providing.

A property the bank can assess. Energy passport, habitable surface stated separately from terrace and cellar, reconciled charges, works fund position and assembly minutes, plus a works estimate per trade. An applicant who arrives with the building documented is an applicant whose file can be decided rather than deferred.

Three questions we are asked

How long should the term be? Long enough for the payment to be comfortable under the stress test, short enough that you are not paying for short-lived work for decades. Match the borrowing to the life of what it funds where you can.

Can I renegotiate later? It is a fresh assessment against your position at that time rather than a continuation of the original one, which is an argument for including foreseeable works at the outset.

Does the guarantee replace a deposit? It is a public guarantee for eligible buyers under conditions, applied for through the Ministry of Housing, and it does not remove the acquisition costs, which are normally excluded from financing and must come from your own funds.