About this model and its assumptions
The purpose of our tool is to provide a comparative estimate of the different possibilities of financing a property in Luxembourg for a private individual. The model calculates, based on the personal and financial situation of the user, as well as on the basis of the project to be financed, the total after-tax cost of each solution as part of the financing of a primary residence, a secondary residence or a rental investment. The possibility is given to the user to reduce the holding period of his property to assess the impact on the total effective financing cost.
The total financing amount is the result of the
sum of the property price, the renovation costs, the acquisition and
mortgage costs, the one-off insurance payment minus the down payment.
The model takes into account the tax credit still available by the buyer(s), if any, to reduce the acquisition costs related to registration and transcription fees, and consequently the amount to finance.
To enable benchmarking, the model is based on the user ability to select a scenario of interest rates changes over the loan period. The model takes the assumption that the rates evolution will be linear over the period. The model provides the analysis of 4 types of financing :
Fixed, the rate remains the same over the entire financing duration.
Variable, the rate will evolve linearly based on the selected scenario.
Revisable, the rate is fixed for a defined period, then becomes variable. The variable rate, at the end of the fixed rate period, will have evolved, and will continue to evolve, based on the selected scenario.
Home savings scheme, the rate is, at discretion, fixed or variable on the bullet loan obtained during the savings period, then becomes fixed after the home savings loan triggers.
For the calculation of after-tax cost, our model considers:
The interest charge, i.e. the sum of the monthly interest paid calculated on the remaining capital to be repaid at the beginning of each month.
Acquisition costs, which correspond to registration fees, notary fees and other fees and taxes directly related to the acquisition of the property.
Mortgage opening costs, which correspond to the registration fees, notary fees and other fees and taxes directly related to the mortgage loan subscribed for the acquisition of the property, as well as the one-off administrative fees charged by the lender.
The insurance fees, based on an estimate of the outstanding balance coverage amount that may vary depending on the requirements of each lender. This cost is also dependent on each borrower, based on his age and health status. The insurance premium can either be paid as one-off payment at the loan opening (single premium), or paid annually (annual premiums).
The early repayment fees, which must be paid in certain cases by the borrower when total or partial capital repayment occurs before the contractual loan maturity. We invite you to refer to our dedicated page "Rate types explained" for more information.
The deductions focus on the interest paid amount (see our dedicated page "Rate types explained"), the home savings scheme payments (see our dedicated page "Home savings scheme explained"), the insurance premium payment(s), the interest subsidies paid by the employer and the mortgage opening fees (excluding registration and transcription fees).
Our model takes into account the realised tax savings over the financing duration by considering, on the one hand, that the tax deduction possibilities remain identical to those applicable today over the project duration, and on the other hand, that the taxable revenues input by the user remain stable.
As part of the home savings scheme, our model considers that accumulated savings must represent 45% of the subscribed capital for the subscriber to become eligible for the prime rate home savings loan.
Home Acquisition Costs and Mortgage Closing Costs include Stamp Duty, Notary Fees, Other Notary Charges and a one-off Banking Charge.
The State of Luxembourg fixes stamp duty and notary fees that depend upon the property price and the mortgage amount. For off-plan and new properties, we consider in our calculation that the land value corresponds to 35% of the total property price.
The other notary charges considered in our model include the VAT payable on the notary fees plus other expenses and disbursements your notary will charge for executing the transfer of ownership (+/- € 1 000) and the mortgage registering (+/- € 500). These expenses and disbursements charged by the notary may slightly vary depending on the specific situation of your acquisition. Our estimate should however be very close to the actual price you will pay.
The banking charge considered in our model is the one-off fee that banks usually charge when taking out a mortgage. We estimate this fee to € 1 000 but this may change from one bank to another.