PURCHASING A DWELLING · ABBL - Association des Banques et Banquiers, Luxembourg Editor Ministère...

Tax allowance

Sale agreement

Individual housing subsidies

Housing loans

Sale before completion

PURCHASING A DWELLING PRACTICAL GUIDE - 2019

The following pages contain a summary of certain aspects of real estate transactions. These explanations are not meant to be comprehensive. Neither the Chamber of Notaries of the Grand Duchy of Luxembourg (part I), nor the Ministry of Housing (part II), nor the ABBL (part III) can be held liable for the information given.

Copyright Ministère du Logement Chambre des Notaires du Grand-Duché de Luxembourg ABBL - Association des Banques et Banquiers, Luxembourg

Editor Ministère du Logement Chambre des Notaires du Grand-Duché de Luxembourg

Date & Print October 2019 & 700 ex.

Foreword by the Minister 05Foreword by the President of the Chamber of Notaries 07

PARTIE IThe Notary

1. The private sale agreement “compromis de vente“ 09 2. Sale before completion („vente en l’état futur d’achèvement“) 11 3. Tax allowance (Bëllegen Akt) 14 4. The notaries of Luxembourg 15

PARTIE IIIndividual housing subsidies for construction, purchase and renovation

1. Construction of a dwelling 21 2. Purchasing a dwelling 27 3. Renovation of a dwelling 29 4. Energy performance renovation of a dwelling 31

PARTIE IIIHome loans for construction, purchase and improvements

1. Financing a property 35 2. Drawing up a financing plan 35 3. Expenses covered by a home loan 36 4. VAT 38 5. Resources 39 6. Different types of interest rate 40 7. Duration of a home loan 41 8. Guarantees to be provided 41 9. Documents to be provided when applying for a home loan 42

CONTENTS

The legislator implemented a wide range of subsidies for individuals wishing to purchase, build, renovate or improve the energy performance of a dwelling. These subsidies are intended to support households in their investment efforts, particularly in the face of increasing pressure on the Luxembourg property market prices. Taking into account the household’s income and composition as well as the surface area of the dwelling, the Ministry of Housing offers various lump-sums and interest rate subsidies on housing loans, as well as State guarantees on mortgage loans. This brochure, which was drawn up together with the Chamber of Notaries is a practical guide containing information explaining the steps and procedures to be followed when purchasing and renovating a dwelling. For more personalised information, please do not hesitate to contact the Guichet unique des aides au logement.

Henri KOXMinister for Housing

FOREWORD BY THE MINISTER

Copyright: SIP / Yves Kortum

The Chamber of Notaries of Luxembourg is pleased to present this second edition of a brochure which has been produced in collaboration with the Ministry of Housing.

This brochure gives inter alia an overview of the various steps related to real estate acquisitions and informs on the risks the signing of a private sales agreement may entail.

In addition to the conference on 15 October 2019, organised within the framework of the “Semaine nationale du logement“, this brochure also sums up the notary’s role as well as the most important notarial tasks in the field of real estate transactions.

Maître Martine SCHAEFFERPresident of the Chamber of Notaries

Copyright: Chambre des Notaires

FOREWORD BY THE PRESIDENT OF THE CHAMBER OF NOTARIES

THE NOTARY

Notaries are public office holders entitled to receive any deeds and contracts to which the parties have or want to confer the authenticity of authentic instruments as well as to certify the date, keep in deposit, issue enforceable copies and certified copies of these documents (Article 1 of the amended law on the organisation of notaries).

36 notaries are practicing in the Grand Duchy of Luxembourg.

All notaries have the same competences. Their tasks include the preparation, the authentication as well as the keeping of authentic instruments.

Notaries perform their mission impartially and in compliance with the applicable professional secrecy.They provide advice to any party to an authentic instrument as well as guidance on judicial proceedings and on the specific consequences of a party’s decision.

CHAMBRE DES NOTAIRES DU GRAND-DUCHÉ DE LUXEMBOURG

53, boulevard Joseph II L-1840 Luxembourg

+352 44 70 21

[email protected]

www.notariat.lu

THE PRIVATE SALE AGREEMENT “COMPROMIS DE VENTE“1.

In the context of real estate acquisitions, a private sale agreement called “compromis de vente” is usually signed prior to the setting up of an authentic instrument. By means of the “compromis de vente” the seller sells a specific property for a specified price.

Parties should be aware that, pursuant to article 1589 of the Civil code, this agreement is an actual contract.

This is why, before signing the sale agreement, the buyer should obtain the necessary information about the property he intends to buy, as for instance the existence of a lease agreement, servitudes, a building permission if applicable, the state of the property as well as the terms of sale.

CONTENT OF THE SALE AGREEMENTDrafting a sale agreement therefore requires particular attention. It is important to include in the agreement all the terms and conditions the parties intend to apply to the sale.

The sale agreement must most notably include:

the names, civil status and addresses of the parties;

the definition of the property

* in terms of houses: cadastral (land registry) specification and land surface;

* for apartments or other property in co-ownership: the cadastral (land registry) specification, ownership thousandths, in the event of a vertical registry, the usable areas (m2) of the various units, balconies, terraces or the exclusive usage of specific parts of the co-ownership;

the price and the payment modalities;

the date on which the keys are handed over to the

buyer and, if applicable, the amount of the indemnification should the commencement date be delayed;

the date of the transfer of the ownership;

the energy efficiency class;

the validity period of the sale agreement;

the notary (notaries) appointed by the parties to receive the authentic instrument of sale.

The sale agreement may also include a fixed penalty in case one of the parties would not comply with the obligations arising from the sale agreement. Usually, the contractual penalty amounts to 10 % of the purchase price.

It is frequently recommended to include in the sale agreement one or more condition precedents, which are applicable for a reasonable and fixed period of time, suspending the effects of the sale.

The purpose thereof is to protect the buyer by suspending his final commitment for as long as he is not sure to obtain the necessary funds to finance the property deal and the required administrative authorisations to carry out his project.

The most common of the condition precedents relates to obtaining a bank loan from a financial institution to finance the acquisition. A reasonable timeframe (generally between 4 and 6 weeks) must be granted to the buying party to allow such party to undertake the necessary steps to obtain a bank loan.

It is possible to include other conditions precedents such as the prior obtention of a building permission or the approval of a PAP land-planning scheme.

09THE PRIVATE SALE AGREEMENT

THE LEGAL EFFECTS OF THE PRIVATE SALE AGREEMENTThe sale is completed at the time the sale agreement is signed.

Ownership and risks are transferred to the buyer, even if the price has not yet been paid and the seller is still occupying the property. As a corollary, registration fees are due. It is, however, customary to include a clause in the sale agreement providing that the property transfer will only be effective on the date the authentic instrument of sale is signed.

It is not mandatory to sign a private sale agreement: the parties may also immediately ask a notary to set up the authentic instrument of sale.

THE AUTHENTIC INSTRUMENT OF SALE To be enforceable against third parties, the property transfer must be acknowledged by an authentic instrument of sale and recorded in the mortgage registry.

10 THE PRIVATE SALE AGREEMENT

11SALE BEFORE COMPLETION

A sale before completion (“vente en l’état futur d’achèvement“ – “VEFA“) is an agreement by which the seller commits to deliver a future property to the buyer, the latter committing to pay the price as the construction work progresses. As a corollary, the buyer becomes the owner of the property in accordance with the progress of the construction works.

POWERS OF THE PROMOTERThe powers of the promoter are reserved to the seller or the promotor promising to deliver a property in accordance with the previously agreed specifications and detailed description. The project owner is free to select the companies and craftsmen to work on the construction and supervises, under his responsibility, the conformity of the works without the buyer being allowed to interfere.

PRELIMINARY CONTRACT (reservation contract)

In case of a VEFA, it is necessary to sign a reservation contract, which must include the following specifications:

the civil status of the contractual parties;

the precise designation of the property or the units of the property that is or are the object of the reservation;

its exact location;

the essential indications of the technical consistency of the property and the quality of the construction (descriptive note);

the completion deadline (case of force majeure / penalties);

the deadline for signing the authentic instrument of sale (validity term of the reservation contract);

the price of the reserved property (VAT 3 % or 17 %, fees of the architect, government subsidies for the energy efficiency class of the building, if applicable);

the amount of the guarantee deposit (which may not exceed 2 % of the expected sale price).

MANDATORY INFORMATION TO BE INCLUDED IN THE DEED OF SALE BEFORE COMPLETIONIn order to be valid, the authentic instrument of a VEFA sale must include the following elements:

the identity of the owner of the land and the existing constructions as well as the identity of the buyer;

the content and the mandatory annexes to the authentic instrument of sale;

the date on which the administrative authorisations were issued and their pertaining conditions;

the description of the property or the part of the property that is sold and the current state of completion;

the price (applicable VAT rates) and the payment modalities thereof;

indication, if the price is adjustable or not and, if applicable, the modalities for such adjustment (construction price index, price index, sliding scale of wages, etc.);

the delivery deadline (date or number of business or calendar days);

the completion guarantees.

SALE BEFORE COMPLETION („VENTE EN L’ÉTAT FUTUR D’ACHÈVEMENT“) 2.

The deed must include in the appendix or as a reference to documents deposited with a notary:

the construction plans;

the descriptive note providing the consistency and the technical characteristics of the construction as well as the materials to be used, the works to be performed and the equipment to be installed;

if applicable, the co-ownership regulations („règlement de copropriété“) must be communicated beforehand to the buyer and a copy must be handed over to him at the latest at the signature of the deed of sale;

the energy pass.

COMPLETION GUARANTEE The seller must provide for a completion guarantee issued by a financial institution established in Luxembourg or in another state of the European Union in order to warrant, in case of failure of the seller, that the planned construction works will be completed

in accordance with the construction plans, the specifications and the initially agreed price.

Instead of a completion guarantee a reimbursement guarantee may be provided for, too. The reimbursement guarantee covers cases where it is materially or legally impossible to complete the construction works and it warrants the reimbursement of amounts paid for the completion of the construction works.

INSTALMENTS Down-payments before the start of the construction works are forbidden.

At the time the authentic instrument of sale is signed, the seller may not accept any amount higher than the value of the land and the already completed construction works.

Once construction has started, payments are due only in accordance with the progress of the works, so that the paid amounts correspond, at any time, to the extent of the completed works.

12 SALE BEFORE COMPLETION

13SALE BEFORE COMPLETION

Legal fixed limits and maximum amounts must be complied with:

the part of the land may not exceed 10 % of the total price, unless the seller proves that the cost price or the realisable value is higher,

instalments may not exceed:

* 15 % of the total price of the property upon completion of the foundations;

* 50 % of the total price upon completion of the upper slab (structural works);

* 95 % at the final completion of the construction works.

The balance is due at the time the property is put at the disposal of the buyer. It may be subject to a deposit in the event the conformity of the construction works with the specification of the agreement is disputed.

GUARANTEES FOR CONSTRUCTION DEFECTSAccording to the provisions of the law, a defect, even though minor, of any of the construction elements, even if such defect does not have any impact on the solidity of the property or its capacity to be used for the planned purpose, is a construction defect.

➢APPARENT DEFECTS

Defects are apparent if they can be detected by the buyer either at the acceptance of the property or before the expiry of a period of one month after taking possession of the property.

➢HIDDEN DEFECTS

For hidden defects, the law distinguishes between defects of the structural works and of the minor works.

Defects of the structural works impact the solidity of the property or make it unfit for the planned used (foundations, structural works, frame, roof, insulation,

etc.). The guarantee covers ten years as of the final acceptance or taking possession of the property.

Defects of the minor works impact the equipment and the interior design of the premises. The guarantee covers two years as of the final acceptance or taking possession of the property.

Construction defects must be reported immediately to the seller.

PROTECTIVE MEASURES FOR THE SELLER IN CASE OF DEFAULTBy exercising his right to rescind from a VEFA sale, the seller may request before court the cancellation of the authentic VEFA instrument. In the event the judge admits this request, the authentic instrument is cancelled. The seller is again the owner of the sold property and must reimburse the amounts paid.

By exercising the privilege of the seller or a mortgage, the seller may also, similar to a financial institution, request a notary of his choice to proceed by an enforced sale of the property. He will then receive the payment of the amounts due from the sale price. The balance of the sale price must then be paid to the initial buyer or his mortgage creditors.

14 TAX ALLOWANCE

REGISTRATION AND RECORDING FEES

Standard registration and recording fees: 7 %

Registration and recording fees with a resale clause: 8.2 %

Municipal surcharge (only for the City of Luxem-bourg): property transfers between living persons through sale, exchange, donation and equivalent transactions and relating to a property used for a different purpose than housing as well as unbuilt property in absence of a commitment to build housing facilities within five years are subject to a surcharge of 50 % of the registration fees.

GENERAL RULES REGARDING THE TAX ALLOWANCEEvery physical person residing, at the time of the ac-quisition of a property, in a Member State of the Euro-pean Economic Area (Member states of the European Union plus Iceland, Liechtenstein and Norway) is entitled to a tax allowance of a maximum amount of € 20.000, without that the registration fees may be less than € 100. This tax allowance may be used for one or more acquisitions up to its full amount.

CONDITIONS

The acquired accommodation is occupied by the physical person;

The physical person moves in and changes the ad-dress with the municipality, in which the property is located within two years as of the acquisition date for existing properties and within four years of such date in case of the acquisition of building land or a property under construction;

The above-specified deadlines can be extended by a decision of the Director of the Administration de l’enregistrement, des domaines et de la TVA (AED) in exceptional cases upon written and duly motivated request to be submitted by the beneficiary of the allowance.

Personally use of the property for private purposes only on a continuous basis during at least two years as of the date of the address change;

Nevertheless, the Director of the AED may waive this condition should it be impossible to comply with because of a case of force majeure, an illness of the buyer, preventing the latter from occupying the property, which must be duly acknowledged by a medical certificate, the enforced sale of the property, expropriation because of public interest, death of the spouse, divorce or dissolution of the legal partnership, etc.

PENALTIESIn case of non-compliance with the occupation deadline or with the duration of personal use of the property, the tax allowance must be reimbursed together with legal interests.

The list of the notaries of the Grand Duchy of Luxembourg who may provide further advice for your project can be found on the website of the Chamber of Notaries www.notariat.lu.

TAX ALLOWANCE (BËLLEGEN AKT)3.

15THE NOTARIES OF LUXEMBOURG

THE NOTARIES OF LUXEMBOURG4.

Me Roger ARRENSDORFF

43, boulevard du Prince Henri L-1724 LUXEMBOURG

+352 262730 1 I +352 26273030 [email protected]

Me Martine DECKER

272, route de Thionville L-5884 HESPERANGE-HOWALD


Me Joëlle BADEN

17, rue des Bains L-1212 LUXEMBOURG


Me Edouard DELOSCH

27, boulevard Marcel Cahen L-1311 LUXEMBOURG-MERL

+352 271807 I +352 27180790 [email protected]

Me Henri BECK

9, Rabatt L-6475 ECHTERNACH


Me Cosita DELVAUX

36, boulevard Joseph II L-1840 LUXEMBOURG


Me Christine DOERNER

10, rue de la Gare L-3236 BETTEMBOURG


Me Sandy DOSTERT

7, rue Michel Thilges L-9573 Wiltz


Me Thomas FEIDER

13, avenue François Clément L-5612 MONDORF-LES-BAINS


Me Thierry BECKER

15, rue Principale L-8805 RAMBROUCH


Me Paul BETTINGEN

71, rue du Golf L-1638 SENNINGERBERG


Me Jacques CASTEL

3, route d’Olm L-8331 CAPELLEN


16 THE NOTARIES OF LUXEMBOURG

Me Carlo GOEDERT

61-63, avenue G.D. Charlotte L-3441 DUDELANGE


Me Danielle KOLBACH

34-36, rue des Cerises L-6113 JUNGLINSTER


Me Marc LECUIT

7, rue Wenzel L-7593 BERINGEN/MERSCH


Me Marc LOESCH

36, rue Marie-Adélaïde L-2128 LUXEMBOURG


Me Alexandra LUX

66, Grand-rue L-8510 REDANGE-SUR-ATTERT


Me Pierre METZLER

33, route de Trèves L-6793 GREVENMACHER


Me Jean-Paul MEYERS

7, rue Xavier Brasseur L-4040 ESCH-SUR-ALZETTE


Me Léonie GRETHEN

10, avenue Guillaume L-1650 LUXEMBOURG

+352 229215 1 I + 352 229215402 [email protected]

Me Mireille HAMES

7, rue Emile Laux L-7544 MERSCH


Me Henri HELLINCKX

101, rue Cents L-1319 LUXEMBOURG


Me Anja HOLTZ

12-14, rue Marie Muller-Tesch L-4250 ESCH-SUR-ALZETTE


Me Jacques KESSELER

13, route de Luxembourg L-4761 PETANGE


17THE NOTARIES OF LUXEMBOURG

Me Frank MOLITOR

101, rue de Bonnevoie L-1261 LUXEMBOURG


Me Joëlle SCHWACHTGEN

4, rue Alexis Heck L-9242 DIEKIRCH


Me Patrick SERRES

16, route de Mondorf L-5552 REMICH


Me Jean-Joseph WAGNER

37, rue des Alliés L-4412 BELVAUX


Me Alex WEBER

101, avenue de Luxembourg L-4940 BASCHARAGE


Me Josiane PAULY

18, Klatzewee L-9714 CLERVAUX


Me Carlo WERSANDT

12, rue Jean Engling L-1466 LUXEMBOURG


Me Blanche MOUTRIER

32A, rue Zénon Bernard L-4031 ESCH-SUR-ALZETTE


Me Elisabeth REINARD

2, Place de l’Hôtel de Ville L-9087 ETTELBRUCK


Me Karine REUTER

488, route de Longwy L-1940 LUXEMBOURG


Me Martine SCHAEFFER

74, avenue Victor Hugo L-1750 LUXEMBOURG


Me Robert SCHUMAN

54, rue J.F. Kennedy L-4599 DIFFERDANGE


INDIVIDUAL HOUSING SUBSIDIES FOR CONSTRUCTION, PURCHASE AND RENOVATION

Financial assistance to individuals in the area of housing is provided for by the amended Housing Assistance Act of 25 February 1979. The legislator implemented a wide range of subsidies aimed at encouraging individual initiatives for the construction, purchase and renovation of housing, aimed at all households that can benefit from them because of their income and family situation.

The diversity of individual housing subsidies ranges from state guarantees of housing mortgages through capital subsidies and interest subsidies. Anyone interested may contact the Guichet unique des aides au logement with their questions relating to the administrative formalities to be undertaken in order to obtain housing-related subsidies.

GUICHET UNIQUE DES AIDES AU LOGEMENT

11, rue de Hollerich L-1741 Luxembourg

+352 8002-1010

[email protected]

www.logement.lu

Office hours Monday to Friday from 8am to 12pm and from 1.30pm to 4pm; Thursday from 8am to 5.30pm

Telephone service: Monday to Friday from 8am to 4pm

21CONSTRUCTION OF A DWELLING

CONSTRUCTION OF A DWELLING 1.

1.1. STATE GUARANTEE

WHAT IS IT?The State may act as guarantor for a mortgage if a household does not have enough guarantees of its own to obtain the necessary credit for the construc-tion, purchase or renovation of a dwelling from a financial institution.

CONDITIONSInterested parties must:

have a savings account with a given financial insti-tution for at least 3 years. The account in question must be opened by a deposit of at least € 100 and a minimum of € 290 must be paid into the account every year for a period of at least 3 years, starting from the date on which the account contained at least € 240;

have obtained from a financial institution a loan corresponding to at least 60 % of the costs of the land and of the construction works. The guarantee relates to the portion of the loan that exceeds 60 % of the cost or the price referred to above, although it shall not exceed 30 %.

In addition,

the amount of the monthly payment must not exceed 40 % of the available income;

the debtor interest rate charged by the lending insti-tution must not exceed the maximum rate set by the amended Grand-Ducal Regulation of 5 May 2011 by more than 3 %.

MAXIMUM AMOUNTThe maximum amount of the State guarantee must not exceed € 148.691,25 (corresponding in 2018 to the average annual index of 793,02 of the construction prices index).

FORMALITIES TO BE COMPLETEDApplications for State guarantees must be made by the lending institution.

1.2. CONSTRUCTION ALLOWANCE

WHAT IS IT?A capital subsidy which can be obtained for the construction of a dwelling (single-family house or apartment) or for the purpose of purchasing a dwelling in the event of a 1st occupation.


have taken out a mortgage loan with a financial in-stitution. The dwelling in question must serve as the main and permanent place of residence for a period of at least 10 years after the date of 1st occupation of the dwelling;

not be either the owner, co-owner or beneficial owner of another dwelling in the Grand-Duchy or abroad;

comply with the following usable floor area criteria:

* Single-family house between 65 m2 at least and 140 m2 at most;

* Apartment between 45 m2 at least and 120 m2 at most.

22 CONSTRUCTION OF A DWELLING

These surface areas may be increased:

by 20 m2 for each dependent child of the applicant, starting from the 3rd child;

by 20 m2 for each relative in the ascending line in the 1st degree of the applicant as well as for any disabled person living in the beneficiary’s dwelling, from the 5th person living in said dwelling, and pro-vided that such person is not themselves the owner of a dwelling.

MAXIMUM AMOUNTThe amount of the allowance varies between € 250 and € 9.700 depending on the family’s income and situation. If the type of construction is an apartment held in co-ownership or a terraced house, the allow-ance shall be increased by 30 %. In the case of a semi-detached house, the allowance granted shall be increased by 15 %.

FORMALITIES TO BE COMPLETED see page 29

NOTE:The construction allowance shall be refused if:

the applicant rents out (even a portion) of their dwelling; however, partial rental to a student registered in a post-secondary educational establishment in Luxembourg is permitted;

the applicant has submitted their application for a construction allowance more than 1 year after the date on which the 1st occupation began;

the applicant donated their assets to a third party;

the dwelling can be financed entirely using the applicant’s or their spouse’s own financial resources.

1.3. SAVINGS PREMIUM

WHAT IS IT?A lump-sum whose amount is equal to the inter-est and premiums on the beneficiary’s savings accounts, provided that at least 90 % of the assets are used to finance the dwelling.


be the beneficiary of a construction allowance or a purchase allowance;

have saved regularly for a period of at least 3 years to a savings account with a single financial institution, with a starting capital of at least €100.

MAXIMUM AMOUNTThe maximum amount of the savings premium may not exceed € 5.000 for a single beneficiary.



MAXIMUM AMOUNTThe additional allowance corresponds to half of the architect’s or engineering consultant’s fees, although it may not exceed the amount of € 1.250.


NOTE:The additional allowance shall be refused if the dwelling or land is subsidised by the State* and if the dwelling is held in co-ownership.

* pursuant to the provisions of Chapter 3 of the amended Housing Subsidies Act (Construction of sets of buildings) of 25 February 1979

1.4. ADDITIONAL ALLOWANCE FOR ARCHITECT’S AND ENGINEERING CONSULTANT’S FEES

WHAT IS IT?This financial assistance is granted as a supplement to the construction allowance to partially pay the architect’s and/or engineering consultant’s fees.


be the beneficiary of a construction allowance or a renovation allowance;

have cause an architect or engineering consultant, authorised to exercise the occupation of architect in Luxembourg, to draw up an architectural and/or technical plan for the construction of a new dwelling provided that the intervention of an architect or engineering consultant is mandatory.

CALCULATION METHODThe interest subsidy is calculated on the basis of the family’s income and situation. Its amount is deter-mined on the basis of the loans taken out, which are taken into consideration up to a maximum amount of € 175.000. Individual applications shall auto-matically be reviewed every 2 years


NOTE:The interest subsidy shall be refused if:

the income exceeds the limit provided for in the law;

the applicant rents out (even a portion) of their dwelling; partial rental to a student registered in a post-secondary educational establishment in Luxembourg is permitted, however;

the applicant donated their assets to a third party.

1.5. INTEREST SUBSIDY

WHAT IS IT?An interest subsidy that may be granted for the purpose of reducing the monthly costs of a mortgage loan for the construction, purchase or renovation of a dwelling.


have taken out a mortgage loan with a financial in-stitution for the purpose of building, purchasing or renovating a dwelling in Luxembourg; the dwelling in question must serve as the main and permanent place of residence for a period of at least 10 years after the date of 1st occupation of the dwelling;

not be the owner, co-owner or beneficial owner of another dwelling in the Grand-Duchy or abroad;

comply with the following usable surface area criteria:





by 20 m2 for each relative in the ascending line in the 1st degree of the applicant as well as for any disabled person living in the beneficiary’s dwelling, from the 5th person living in said dwelling and provided that such person is not themselves the owner of a dwelling.



CALCULATION METHODInterest credit is calculated on the basis of the num-ber of dependent children and the loans taken out, the latter of which are taken into consideration up to an amount of € 175.000. The household’s taxable income may not exceed € 98.330 (2018).

Individual applications shall automatically be reviewed every 2 years.

Please note that children may only be taken into account if the applicant for interest credit receives family allowances for the child or if the child is co-insured on the applicant’s health insurance scheme.


NOTE:Interest credit shall be refused if:

the applicant no longer has any dependent children;


the applicant donated their assets to a third party.

1.6. INTEREST CREDIT

WHAT IS IT?An interest aid of 0.50 % per dependent child, which may be granted in order to reduce the monthly costs of a mortgage loan for the construction, purchase or renovation of a dwelling.


have taken out a mortgage loan with a financial institution for the purpose of building, purchasing or renovating a dwelling in Luxembourg; the dwelling in question must serve as the main and permanent place of residence;

not be the owner, co-owner or beneficial owner of another dwelling in the Grand-Duchy or abroad.

MAXIMUM AMOUNTThe maximum amount of the allowance for drawing up the LENOZ certificate may not exceed € 1.500 for a single-family house and € 750 for a dwelling in a collective building.


NOTE:LENOZ certification is optional. However, in order for the applicant to qualify for a Prime-House, their dwelling must meet a number of criteria that form an integral part of the LENOZ certificate.


1.7. ALLOWANCE FOR LENOZ CERTIFICATION

WHAT IS IT?An allowance intended for individuals and companies having caused a LENOZ (Lëtzebuerger Nohaltegkeets Zertifizéierung fir Wunngebaier) certificate to be drawn up for the purpose of assessing the sustainability of their dwelling.

CONDITIONS

Interested parties must:

be the owner of the certified dwelling;

have a LENOZ certificate for the dwelling.

27PURCHASING A DWELLING


see page 21

2.2. PURCHASING ALLOWANCE

WHAT IS IT?A lump-sum that may be obtained for the purpose of purchasing a dwelling (single-family house or apart-ment) that was previously inhabited.


have taken out a mortgage loan with a financial institution; the dwelling in question must serve as the main and permanent place of residence for a period of at least 10 years after the date of the notarial deed documenting the purchase of the dwelling;

not be the owner, co-owner or beneficial owner of an-other dwelling in the Grand-Duchy or abroad;

comply with the following usable surface area criteria:




by 20 m2 for each dependent child of the applicant, from the 3rd child;

by 20 m2 for each relative in the ascending line in the 1st degree of the applicant as well as for any disabled person living in the beneficiary’s dwelling, from the 5th person residing in said dwelling and provided that such person is not themselves the owner of a dwelling;

* No surface area requirements must be met for buildings built before 10/09/1944.

PURCHASINGA DWELLING2.

MAXIMUM AMOUNTThe amount of the allowance varies between € 250 and € 9.700 depending on the family’s income and situation. If the type of construction is an apartment held in co-ownership or a terraced house, the allow-ance shall be increased by 30 %. In the case of a semi-detached house, the allowance granted shall be increased by 15 %.


NOTE:The purchasing allowance shall be refused if:

the applicant has submitted their application for a purchasing allowance more than 1 year after the date of the notarial deed documenting the purchase of the dwelling;


the applicant donated their assets to a third party;

the dwelling can be financed entirely using the applicant’s or their spouse’s own financial resources.

28 PURCHASING A DWELLING

2.3. SAVINGS PREMIUM

see page 22


see page 24


see page 25


see page 26

29RENOVATION OF A DWELLING


see page 21

3.2. RENOVATION ALLOWANCE

WHAT IS IT?A lump-sum that may be obtained for the purpose of renovating a dwelling. The allowance is calculated on the basis of the family’s income and situation. It is granted for certain works carried out for the purpose of improving a dwelling’s fitness for normal habitation, cleanliness/sanitation and security. It is also granted for the purpose of creating new rooms and increasing the size of existing rooms.


be the owner of the dwelling that is intended to serve as the main and permanent place of residence;

not be the owner, co-owner or beneficial owner of another dwelling in the Grand-Duchy or abroad;

in the event of new rooms being created or existing rooms being enlarged, comply with the following usable surface area criteria:



RENOVATION OF A DWELLING 3.

30 RENOVATION OF A DWELLING



by 20 m2 for each relative in the ascending line in the 1st degree of the applicant as well as for any disabled person living in the beneficiary’s dwelling, from the 5th person living in said dwelling and pro-vided that such person is not themselves the owner of a dwelling.

MAXIMUM AMOUNTThe renovation allowance corresponds to a maxi-mum of 30 % of the amount of the invoices relating to the renovation works. It may not exceed a total sum of € 10.000 per beneficiary and is capped based on the family’s situation and income.


NOTE:The renovation allowance shall be refused if:

the year of 1st occupation is less than 15 years ago (exception: in the event of creating new rooms or increasing the size of existing rooms, the building’s age shall not be taken into account);

the applicant has submitted their application for a renovation allowance more than one year after the date on which the renovation works were completed.

3.3. ADDITIONAL ALLOWANCE FOR ARCHITECT’S AND ENGINEERING ET D’INGÉNIEUR-CONSEIL

see page 23


see page 24


see page 25


see page 26

31ENERGY PERFORMANCE RENOVATION OF A DWELLING

4.1. KLIMAPRÊT

WHAT IS IT?A scheme of financial subsidies aimed at helping you to finance the sustainable energy performance renovation of your dwelling. The interest subsidy granted subject to climate loans is intended to re-duce the monthly costs of a loan taken out for the purpose of rehabilitating a dwelling’s energy performance.

CONDITIONSAny owner (individual or company) of a dwelling older than 10 years may be granted a reduced in-terest KlimaPrêt.

An applicant who is a natural person, owner of a dwelling older than 10 years, may be granted a zero interest KlimaPrêt, based on their taxable income, their family situation and the usable surface area of their dwelling.

TERMSReduced interest KlimaPrêt

* Loan limited to a main amount of € 100.000 per dwelling over a period of 15 years;

* 1.5 % interest subsidy up to a maximum of 10 % of the main amount.

Zero interest KlimaPrêt

* Loan limited to a main amount of € 50.000 over a period of 15 years;

* Coverage of all interest due on the loan; the ben-eficiary only reimburses the principal sum of the loan granted;

* The loan is fully guaranteed by the State;

* Granting of a premium of 10 % of the main amount of the loan in order to reduce the overall amount to be reimbursed (maximum € 5.000);

* Direct coverage of fees related to the services of an energy advisor, which is a prior requirement in order to being granted the zero-interest loan.

FORMALITIES TO BE COMPLETED:In order to submit an application, applicants must:

Obtain a housing subsidies application form from the Guichet unique des aides au logement;

Fill in the form and attach all required documents;

Send the form (+documents) to the Guichet unique des aides au logement.

Once you have submitted your application, you will be informed as soon as possible as to whether you may be granted one or more of the subsidies requested.

ENERGY PERFORMANCE RENOVATION OF A DWELLING4.

32 LA RÉNOVATION ÉNERGÉTIQUE D’UN LOGEMENT

HOME LOANS FOR CONSTRUCTION, PURCHASE AND IMPROVEMENTS

1. 2. FINANCING A PROPERTY

DRAWING UP A FINANCING PLAN

Buying or building your own home is a significant investment, so it is important to talk to your bank about the amount of money you are able to borrow before undertaking any property projects.

The amount you can borrow will primarily depend on your ability to repay the loan, as well as on your own capital (savings, donations, property sale, etc.). Your ability to repay will be based on your disposable income, which is calculated as your total monthly income minus any regular monthly expenditure. Ideally, your monthly expenditure should not exceed 40 % of your monthly income.

Drawing up a financing plan will give you an over-view of how you will pay for your property project. It lists all the expenses related to the investment and all of your resources, so you can see how much money you will need to borrow.

35FINANCING A PROPERTY

Expenses Resources

Total cost (T1) Total of own capital (T2)

T1-T2 = Amount to be borrowed

36 EXPENSES COVERED BY A HOME LOAN

3. EXPENSES COVERED BY A HOME LOAN

3. 3. PUBLIC NOTARY FEES

Public notary fees include:

registration and recording charges. The usual rate for the purchase of a property (house,

apartment, building plot) is 7 % of the purchase price, of which 6 % goes to registration charges and 1 % goes to recording charges. The Law of 30 July 2002 grants an allowance, in the form of a tax credit, on reg-istration and recording charges (“bëllegen Akt”) when purchasing accommodation located in Luxembourg as owner-occupied housing. This tax credit is limited to € 20.000 per person;

mortgage-related fees, which include the registration and recording of the mortgage at the Mortgage Registry Office (“Bureau des Hypothèques). This fee is the same across all banks and varies depending on the amount of the loan.;

3. 1. PROPERTY PURCHASE 3.1. PROPERTY PURCHASE

If you wish to purchase a property, you will need to add expenses for any renovation works you may need to carry out to the purchase price indicated in the preliminary sale agreement. With the exception of a fitted kitchen or other built-in furniture, such as a wardrobe, a home loan can-not be used to pay for furniture.

3. 3. PROPERTY CONSTRUCTION 3.2. PROPERTY CONSTRUCTION

In addition to the amount required to purchase the land and the construction costs (inclusive of VAT), you should also allow for unexpected and additional costs that may account for +/- 20 % of the build cost, as well as various fees, such as the architect’s fee, connection fees, building permits and energy advisor fees.

37EXPENSES COVERED BY A HOME LOAN

without children 1 child 2 children 3 children

Up to 30 years € 6.000 € 7.200 € 8.400 € 9.600

31 years € 6.480 € 7.776 € 9.072 € 10.368

32 years € 6.960 € 8.352 € 9.744 € 11.136

33 years € 7.440 € 8.928 € 10.416 € 11.904

34 years € 7.920 € 9.504 € 11.088 € 12.672

35 years € 8.400 € 10.080 € 11.760 € 13.440

…

40 years € 10.800 € 12.960 € 15.120 € 17.280

…

45 years € 13.200 € 15.840 € 18.480 € 21.120

…

50 years and more € 15.600 € 18.720 € 21.840 € 24.960

Public notary fees which amount to +/- € 3.000 and cover:

* fees as remuneration for public notary work. The amount of this remuneration is set by grand-ducal regulation;

* fees for any documents and services required to draw up the deed of sale (e.g. land registration certificate, administrative documents, surveyor, etc.).

3.4. MORTGAGE ARRANGEMENT FEE

This is the fee charged by the bank for processing the loan application and it amounts to a % of the loan amount.

3.4. MORTGAGE ARRANGEMENT FEE

Repayment insurance is a form of risk insurance. Its pri-mary purpose is to cover mortgage debt. In the event of the death of the insured party, the insured capital (capital with decreasing amount) will be reimbursed to the beneficiary (the bank). The aim is to protect the insured party’s family from financial hardship. The supplementary “Permanent Disability” cover additionally compensates for loss of in-come in the event of permanent disability.

Fiscal implications

Annual premiums paid into an repayment insurance scheme are tax deductible (as special expenses) up to an annual limit of € 672 per household member.

The single premium for repayment insurance is also tax deductible. The amount depends on the age of the insured party and the composition of the household (from € 6.000 to € 31.200).

38 VAT

VAT4. The usual VAT rate for construction and renovation is 17 %. It is possible to benefit from a super-reduced VAT rate of 3 %, provided that you intend to live in the house as your main residence for more than two years. If, during this time, the accommodation is used for other purposes or remains unoccupied, the remainder of the VAT must be paid. The maximum recoverable amount per constructed or renovated accommodation is € 50.000 (= construc-tion value of € 357.143 excl. VAT).

The super-reduced 3 % VAT rate applies to:

new build accommodation;

renovations to accommodation within 5 years of its purchase;

renovations to accommodation 20 years after its construction completion date.

You may either:

apply for reimbursement of the difference between the nor-mal VAT rate and the reduced rate (e.g. on construction completed before an off-plan purchase - VEFA);

or request direct application of the super-reduced 3 % VAT rate.

39 RESOURCES

5.1. OWN CONTRIBUTION

Generally speaking, your own contribution should be equal to 20 % of the purchase price of the primary prop-erty. This usually comes from:

savings;

donations;

amounts already paid (e.g. bills paid before the sub-mission of the loan application);

net proceeds from a property sale (sale of property before the new loan has been liquidated);

personal work.

5.2. PRE-FINANCING (BRIDGING LOAN)

This is an intermediary financing solution while waiting to receive a guaranteed income (e.g. the sale of a property you already own). A bridging loan is a variable rate loan that normally has a maximum duration of 24 months. Interest on this loan is due monthly and the capital is to be reimbursed on the loan expiration date.

The amount of the bridging loan depends on the sale price of the property less estate agency fees, the reimbursement of state subsidies, existing loans and any early repayment fees and reserves.

RESOURCES5. Expenses Resources

When purchasing an existing building

Own capital (immediately available)

Purchase price Savings

Cost of any renovation works Donations

When constructing a new building

Amount already paid

Purchase price of building plot Net proceeds from sale of property

Construction carried out Housing subsidies

Construction costs (incl. VAT) Pre-financing (bridging loan)

Structural work

Interior finishes

Electrical work

Heating/sanitation work

Exterior landscaping

Fitted kitchen

Miscellaneous costs

Unplanned costs

Charges and fees

Registration charges

Mortgage registration fees

Public Notary fees

Administrative fees

Repayment insurance

Total cost (T1)Total of own capital (T2)

T1-T2 = Amount to be borrowed

40 DIFFERENT TYPES OF INTEREST RATE

DIFFERENT TYPES OF INTEREST RATE 6.

6.1. FIXED RATE LOAN

A fixed rate is a rate that remains unchanged for a set duration and the loan is reimbursed through fixed monthly repayments. The amount of the monthly repayments to the bank is pre-determined from the very beginning and you are therefore protected against any interest rate rises. You may make early repayments at any time. Early repayment may give rise to an indemnity and to an early repayment fee.

6.2. VARIABLE RATE LOAN

A variable rate is an interest rate for which monthly re-payments change to reflect the rise or fall of market rates. Early repayment of the loan is possible at any time and is not subject to penalties.

6.3. FIXED RATE AND VARIABLE RATE LOAN

It is possible to take out a fixed rate loan and a variable rate loan and, in doing so, benefit from the flexibility of early repayment of the variable rate loan and the stability of fixed monthly repayments for the fixed rate loan.

41DURATION OF A HOME LOAN

A loan agreement may be taken out for up to 30 years. This duration may vary depending on the type of property and the customer’s requirements. Retirement age should be taken into account, as it may lead to reduced income as a result of leaving the workforce.

DURATION OF A HOME LOAN

GUARANTEES TO BE PROVIDED 7. 8.

For a home loan to be approved, banks generally require a first mortgage registration of the building or the plot be-ing financed as collateral, as well as wage assignment.

Additional guarantees may be requested, such as:

a mortgage on another building;

a joint and several guarantee from a third party;

a pledge of assets;

a State guarantee.

Any person wishing to benefit from the State guarantee must have been in possession of a savings account for at least 3 years. This savings account must have had an opening balance of € 240 and an annual deposit of at least € 290 over a minimum period of 3 years.

42 DOCUMENTS TO BE PROVIDED WHEN APPLYING FOR A HOME LOAN

DOCUMENTS TO BE PROVIDED WHEN APPLYING FOR A HOME LOAN 9.

proof of ID of the applicant(s)

proof of income (pay slips, salary, etc.)

proof of own capital

preliminary sale agreement or notarial deed for the sale of land

quotes for renovation or construction works, if applicable

photographs or blueprint of the building to be purchased/constructed

design brief

bank statements from other banks (current accounts, existing loans, etc.).

43PIÈCES À FOURNIR À LA BANQUE LORS DE LA DEMANDE DE PRÊT AU LOGEMENT

NOTE

PURCHASING A DWELLING · ABBL - Association des Banques et Banquiers, Luxembourg Editor Ministère...

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