What explains this growing trend in a country where customers tend to be very loyal to their bank? For Vincent Quillé, Managing Director of Nexfin, a Luxembourg-based mortgage brokerage company, this change of habits is mainly down to rising property prices.“Given today’s property prices, even the smallest saving is very welcome,” explains this mortgage structuring expert. It can also be explained by the highly diversified financing offer in Luxembourg, which is difficult to get to grips with on your own. Using a mortgage broker therefore not only allows you to obtain a mortgage with favourable terms but also to take advantage of advice from a seasoned professional on a very complex subject. “It's often the financial project of a lifetime,” he explains. Hence the importance of not playing it by ear.
Before you start looking for your new home, you need a clear picture of the type of property you can afford. A broker can help you with this initial assessment. This is not the time for rough estimates: “Borrowing capacity shouldn’t be mistaken for purchasing power.” It is important to make sure you factor in the additional costs (insurance, registration and solicitors’ fees), as these amounts must come from your savings and vary considerably depending on your situation. So, depending on your buyer profile (first-time buyer, investor), your income, your debt ratio and your risk appetite, the mortgage broker can determine the maximum amount of your purchase. You can assess your purchasing power or the feasibility of a concrete home-buying project yourself on the Nexfin website.
Vincent Quillé believes that customers tend to focus too much on the interest rate alone. Whereas by “taking a good look at the financing structure, it is sometimes possible to bring down the total net cost of the mortgage by up to 30%” he explains. That is why the first task for any mortgage broker is to challenge preconceived ideas. “Customers come along with an idea of the type of financing they want. They know, for example, that they want to borrow at a fixed rate. Without realising that, in the event of early repayment, they are setting themselves up for significant penalties that they could have avoided with a more suitable financing structure.” So taking the time to precisely define the contours of your property purchase and your life project allows us to come up with the best solution. In fact, you can never be too careful, as "In Luxembourg, you can take just about any risk you want when it comes to financing property. That's why it's important to weigh up the different scenarios to find out what would happen if rates soared or if you were to sell in 4 years' time.”
In Luxembourg, interest on mortgages taken out to purchase your primary residence is tax deductible, as are the insurance costs. An advantage that can lead to significant savings as long as you seek specialist advice. For example, by deciding to pay the insurance of your mortgage as a single premium, you could save up to 40% of the total premium amount in tax. However, “these trade-offs can’t just be dashed off on a paper napkin,” explains Vincent Quillé. This gave the entrepreneurial young managing director the idea of developing his own mortgage calculation tools adapted to the Luxembourg legal framework.
The criteria to consider when choosing a mortgage broker are undoubtedly their ability to listen and explain. Calculation tools are not everything. Above all, you need a relationship based on trust. At your request, the broker you have contacted will invite you to an appointment. One to two hours are generally necessary to get a firm grasp of your project. At the end of this appointment, the professional will suggest that you sign a mandate. Less than a week later, they should have several offers from the banks to propose to you.
Outstanding balance insurance is an important protection often required by the lender when taking out a mortgage. Even though most banks offer it, the best solution is to turn to an insurance company to benefit from the most competitive rates.
To guide you through this process, our AXA agents are available to discuss your project and analyse your needs in terms of provident insurance and home insurance.
Thanks to this personalised support, nothing stands between you and your new home!