It’s not always easy to come up with the guarantees your bank will ask for when you apply for credit to buy a home. But did you know that the Luxembourg government can guarantee part of your mortgage loan, subject to certain conditions? myLIFE explains how it works and who is eligible.
Sandra and William have been together for a few years and they’re excited about their plans for the future, which include buying a house. They know they won’t be able to afford a mansion on their modest incomes, but they’ve already picked out a property that ticks all the right boxes. With high hopes, they arrange a meeting with their bank adviser to discuss financing for the house where they’re already dreaming of raising a family.
But then they’re brought back down to Earth with a bump. Despite the young couple’s savings and promising profile (regular income, low level of debt, diligent account management), the bank can’t grant them a real estate loan without a guarantee (mortgage, deposit, etc.). The bank asks them to stump up between 10% and 20% of the property value to cover things like notary fees and acquisition charges. Sandra and William aren’t in a position to pay and can’t provide sufficient guarantees to secure their loan. And their families don’t have deep pockets either.
Should they give up on their dreams of home ownership, their interior decorating plans or that spare room for a future baby? Luckily, all is not lost. Their banker reassures them by telling them about government aid schemes designed to help families get onto the property ladder, subject to certain conditions. The State home loan guarantee is one such scheme.
The State guarantee covers the portion of the loan that exceeds 60% of the total cost of the investment, but without exceeding 30% (or €269,807).
“When a household can’t provide sufficient guarantees of their own to secure credit to finance the construction, purchase, improvement, conversion or renovation of a dwelling, the State may (subject to certain conditions) help to guarantee a home loan,” the banker explains to Sandra and William, who are in this exact position. “This is called a State home loan guarantee.”
In practical terms, this means that the State supplies one part of the total guarantee you’ll need to provide to secure a loan. Specifically, the State guarantee covers the portion of the loan that exceeds 60% of the total cost of the investment, but without exceeding 30% (or €269,8071).
Sandra and William’s circumstances mean that this could be their ideal loan solution. All they need to do now is check that they meet the eligibility criteria.
Sandra and William’s banker helps them to go through the various conditions for securing this type of government assistance.
Sandra and William go through each point carefully and realise they meet all of the criteria! They can safely expect to receive a helping hand from the government to make their dream a reality.
N.B.: a State home loan guarantee can also be granted for loans taken out with an approved bank or financial institution outside Luxembourg (within the European Union and European Economic Area).
Applications for the guarantee are submitted through the financial institution granting the loan.
Applications for the guarantee are submitted through the financial institution granting the loan. In our example, Sandra and William’s banker is the person who will submit it to the Ministry of Housing.
To that end, the banker will help Sandra and William to fill out a State home loan guarantee request and send it to the Single Point of Contact for Housing Assistance (11 rue de Hollerich, L-1741 Luxembourg) along with the following supporting documents:
While they wait to hear back, Sandra and William can look into the other forms of housing assistance (home ownership subsidy, interest subsidy, savings subsidy, improvement subsidy, etc.) available from the Single Point of Contact for Housing Assistance or use the assistance simulator at Guichet.lu. They may find out that they’re eligible for other forms of government assistance too.
1 Corresponding to the index 100 of the average annuel construction price index (1037.72 for 2022).
Sustainable development issues have been a key concern in recent years, and businesses have a…
When it comes to investing, it’s advisable to take the long view and to follow…
Have you ever been to a meeting that seems to drag on with no meaningful…
In a hyperconnected world that constantly demands our attention through messages, notifications and alerts, it’s…
What distinguishes a manager from a leader? What are the rules of leadership, what mistakes…
Just launched a new product or service, or created an online store? Want to stand…