GUIDE TO HOUSING LOANS

Transcription

1 Tax deductions Government aids Guarantees Financing Instalments Conditions Interest rates Insurances Pre-sale agreement Loan duration Municipality aids Procedures GUIDE TO HOUSING LOANS

2 SUMMARY When and why apply for a housing loan? Different types of housing loans : a solution for each situation! How much can you borrow? What is your maximum budget? How to finance your project? Your financing plan Guarantees Costs of a housing loan APPENDIX

3 Housing aids Environmental issues and aids Take advantage of an interest rate bonus with etika Tax matters Insurances Practical advice Preparing your housing loan application Your online loan application on Ten good reasons to choose BCEE I II III IV V Interest rates and monthly instalments Your personal financing plan BCEE branch network Useful addresses Code of conduct

4 Guarantees? Variable interest rate? Insurance? 2

5 Are you planning to build, buy or renovate/refurbish a home? Such a project is a considerable investment that requires careful preparation and a trustworthy financial partner. Depending on the nature of your project and on your personal situation, various financing solutions are open to you. Our advisors are at your disposal to develop, with you, a tailor made financing plan perfectly suited to your needs. Moreover they will guide you through the available State aids and will provide you with practical advice. Do not hesitate to call on one of our advisors at any BCEE finance centre or branch of your choice. A complete list of our branches can be found in the appendix. A housing loan : easy with good guidance...

6 When and why apply for a housing loan? Buying, building or even renovating/refurbishing a home requires substantial funds. As financing such a project on personal funds is rarely possible, a housing loan is the perfect solution. ADVICE Before actively embarking on a real estate project, we recommend you to visit any BCEE branch to find out how much you may borrow. A clear vision of your budget and your financing possibilities will help avoid unnecessary steps and will save you time. A housing loan provides funds for: the acquiring of an existing house or apartment, the building of a home, the renovating or refurbishing of a home, the buying of building land. There are several types of housing loans with a duration up to 30 years. 4

7 Different types of housing loans : a solution for each situation! Each real estate project is unique and requires individual processing. Our advisors will give you their attention to develop, with you, a tailor made financing plan perfectly suited to your needs. The main features of our different housing loans are listed below. Standard fixed rate housing loan fixed monthly instalments during the fixed interest rate period, secures your budget against interest rate increases, fixed interest rate terms (until revision) : 5, 10, 15 or 20 years, extraordinary repayment only possible upon expiry of the fixed interest rate period. Otherwise, payment of an early repayment penalty taking into account the prevailing market bid rates for the remaining period of the loan. maximum loan term : 30 years. Standard variable rate housing loan monthly instalments adjusted according to base rate variations, early repayment possible at any time and without penalty, maximum loan term : 30 years. Split rate housing loan ADVICE Depending on your project and individual circumstances, a financing plan that combines several types of housing loans may turn out to be most suited. Speak to one of our advisors for a custom offer that meets your personal needs. By financing your project with a loan where a portion is on a fixed rate basis and the other portion is on a variable rate basis, you may benefit from the advantages of both types of rates: flexibility of early repayment on the variable part; monthly instalments on the fixed part will not change. LOGIflex housing loan loan that is split into two parts : -- -standard part where monthly instalments include capital and interests, -- - in fine part where monthly instalments are limited to the accrued interest whereas the borrowed capital becomes payable at latest upon maturity of the loan, reduced monthly instalments, increased repayment flexibility, particularly suited to young people beginning their careers with a limited budget, maximum loan term : 25 years.

8 EcoPrêt Logement mortgage loan with advantageous financial terms and conditions, intended to finance the construction or purchase of a home that meets particular energy-efficiency standards; like a passive energy home (class AA) or a low energy consumption home (class BB), maximum loan term : 30 years. EcoPrêt Energie intended to finance energy-efficient home improvement on existing homes, preferentiel interest rate, no mortgage registration, condition for approval : State aids must be granted for your project, limited to an amount of EUR 50,000, maximum loan term : 10 years. Bridge loan intermediary financing solution pending the sale of a building or a certain inflow of funds (i.e. payment of life-insurance), interest payable in monthly instalments or in full upon final maturity of the bridge loan, capital can be reimbursed upon maturity of the bridge loan, maximum loan duration, in principle : 24 months. ADVICE The association etika Initiative fir Alternativ Finanzéierung a.s.b.l., in cooperation with BCEE offers an additional interest rate advantage to private individuals planning to finance a housing project that meets strict environmental requirments. For further information, visit and or see page 14. BHW Housing savings scheme if you have taken out a housing savings plan such as a BHW savings scheme, we can offer you intermediary financing until maturity of your housing savings plan (+/- 12 years). Thus the part of the housing loan financed this way is paid off by the allocated benefits of the housing savings plan. In the meantime you pay the interests to BCEE and the amount of savings to the housing savings institution BHW according to the contract. This method is particularly attractive from a tax perspective. 6

9 EUR 200,000 EUR 400,000 EUR 600,000 How much can you borrow? What is your maximum budget? ADVICE The simulation tool available on will give you an estimate of your monthly instalments. However it will never completely take into consideration your particular situation. Each real estate project is unique and therefore requires individual handling. Before actively embarking on a real estate project, find out how much you may borrow. This will help you to identify the real estate object that suits your budget. The amount you may borrow will depend on many factors, such as your ability to repay the loan and your personal assets to be invested in the project. Our advisors will use these two elements to draw up a financing plan, allowing to determine the maximum amount you may borrow and thus, the maximum price of the real estate asset you may acquire.

10 ADVICE Complete the attached financing plan for a rough estimate of the financial aspect of your real estate project and to prepare your appointment with one of our advisors. How to finance your project? Your financing plan Our advisors will assist you in drawing up your personalised financing plan. In a simplified way, a financing plan may be summarized as follows : 1. Calculation of the total costs of the real estate project : sum of all direct and indirect costs related to your real estate project. 2. Determination of your own financial input : sum of all your personal means that can be invested in your project. 3. Determination of the amount to be borrowed : by subtracting your personal means from the total costs, you get the amount you will have to borrow to finance your real estate project. 4. Determination of your ability to repay : your ability to repay corresponds to the total of your regular income (salaries, family allowances...) minus the total of your regular expenses (monthly instalments for existing loans...). It is generally accepted that one third of the available income can be used for the repayment of a housing loan. However this ratio may be exceeded as long as a balanced budget is maintained. Don t forget to set aside a part of your budget for maintenance expenses. 8

11 Guarantees For our housing loans, except for EcoPrêt Energie loans, we require, in principle, a 1st rank mortgage on the real estate asset and an assignment of wages. Additional guarantees to the mortgage that you or a third party may grant are: a mortgage on another real estate asset, a bank guarantee, collateral (cash or securities), the assignment of the benefits of a housing savings scheme, the assignment of the benefits of a life insurance policy, a security from a third party, a State guarantee, etc. ADVICE Draw up a list of possible guarantees as you prepare for your first appointment at our branch. The amount you may borrow will depend on your own financial means, on your ability to repay and on the guarantees you will provide. As a general rule, bank financing may amount to 80 % of the guarantees on condition that your financing plan is insured and that your repayment ability has not been exceeded.

12 ADVICE A comparison of the various housing loan offers is only objective if the APR is considered. Only the Annual Percentage Rate of charge takes into account all the additional fees that are charged by the financial institutions. Cost of a housing loan Each housing loan is subject to the payment of interest that varies according to the interest rate of the type of the housing loan chosen. Our interest rate offers are competitive, making BCEE your privileged partner in home financing. Besides interest rates, additional fees have to be taken into consideration : loan application fee, deed fees. The fees charged by BCEE include fees that are inherent to the mortgage contract drawn up by BCEE and to the mortgage registration with the Luxembourg mortgage office. Apart from the mortgage release fees charged at the final pay-off of the loan, no further loan application fees will be charged at your expense by BCEE. However, for guarantees abroad, the related mortgage registration fees will have to be paid personally. Please also note that BCEE will communicate the APR (Annual Percentage Rate of charge) on your housing loan in a clear and transparent manner. Our loan simulator on will give you an estimate of your monthly instalments. Please bear in mind that only a concrete offer will take into account your personal circumstances. 10

13 Housing aids For acquiring, building or renovating/refurbishing a real estate asset, the Luxembourg government as well as several local authorities grant financial aids. The granting conditions and the amount of most of these aids (capital aids and interest subsidies) depend on your family and financial situation, your income and the living area of the real estate asset to finance. These aids are included in your own financial funds to invest in your project. For housing built after September 10, 1944, the following limits are to be respected : 65m² living area of a house 140m² 45m² living area of an apartment 120m² These limits are to be increased by 20m² from the third dependent child and under certain conditions, by 20m² for any ascendent living in the same household that counts more than four members. ADVICE The personalised advice we offer in our branches includes all the information regarding State housing aids. If, prior to an appointment with one of our advisors you wish to obtain further information on the amounts and the conditions under which such aids are granted, please refer to : Service des Aides au Logement Coin avenue Gaston Diderich and Boulevard G.-D. Charlotte L-1420 Luxembourg Tel : (+352) Here below an outline of the main available aids as on December 31, For a complete list and for details on the granting conditions of such State aids, we recommend that you get in touch with one of our advisors or the Service des Aides au Logement ( The legislation in force shall be applicable. Capital aids Construction grants for the construction of a home or the first occupation of an existing home (max. EUR 9,700). Acquisition grants for the purchase of a home previously occupied (max. EUR 9,700). Improvement grants to finance part of the renovation of a house no less than 15 years old (max. EUR 10,000). Savings premiums which depend on related interests on your different savings accounts (max. EUR 5,000). Grants for architect fees (max. EUR 1,250). Grants for renovations to meet the needs of the physically disabled. Grants in the framework of the dependency insurance to finance work that will allow dependent individuals to remain in their homes. Tax credits on notary deeds Resident individuals may be granted a tax credit to be claimed on the registration and transcription duties usually due when acquiring property or land intended for personal and principal use. For a jointly taxable couple, the amount of the grant is doubled. Tax credits are subject to conditions. More information on

14 Super-reduced VAT rate When building or renovating your home under specific conditions and up to a specific amount you may be eligible for a super-reduced VAT rate of 3 %. When buying a home that is new or has not been lived in you may apply for a partial VAT restitution. More information on ADVICE If you are planning to buy an existing home where renovation and/or refurbishment work is required, speak to the current owner first to enquire whether he already benefitted from the super-reduced VAT rate on the real estate asset and to find out what the remaining limit is. Interests aids Interest relief is calculated on the basis of the number of dependent children in the household and may result in a reduction of your monthly mortgage instalments. Interest subsidy depends on your family and financial situation and is subject to living area and occupancy duration conditions. The subsidy may result in a reduction of your monthly mortgage instalments. It must be noted that, both for interest subsidy as well as interest relief, the borrowed capital is taken into consideration up to a maximum amount of EUR 175,000; it may be increased by EUR 50,000 for all invoices in relation to rational use of energy. State guarantees Should you not be able to provide sufficient personal guarantees, the State may, under certain conditions, stand guarantor for part of your loan. Local authority aids Some local authorities offer acquisition and/or construction bonuses, as existing under the legislation of the "Fonction Publique", and subsidies for the energy rehabilitation of existing homes. For further information, consult your local authority. 12

15 Environmental issues and aids Building in an environmentally respectful way should not be limited to a fashion phenomenon. It also means acting as a responsible citizen, displaying respect towards future generations and reducing energy expenses on a daily basis. The Luxembourg government has developed a range of financial grants to promote a rational use of energy and foster renewable energy. ADVICE Before embarking on an environmentally friendly construction or renovation project, find out whether there might be subsidies available to you. We also recommend that you make an appointment with an independent energy advisor. Expert in the field, he will guide you through the various aids and will also offer an objective opinion on the usefulness and need for the work in consideration. BCEE is actively supporting this policy through its "EcoPrêt" product range. "EcoPrêt Logement" and "EcoPrêt Energie" loans offer preferential rates for the construction of a home or the renovation of an existing home as long as these investments are also eligible for State aids. Hereunder an overview of the works for which State grants may be applied : construction of low energy houses (class BB) or of passive houses (class AA), improvement of thermal cladding on existing houses, energy consulting services, condensing boilers and hydraulic balancing, photovoltaic solar collectors, solar thermal installation, heat pumps, geothermal heat exchange systems, central heating with wood pellets or log stoves, boilers on biomass fuel in connection with thermal solar collectors, micro-cogeneration units based on renewable energy, installations and/or connections to a heat supply network fuelled by no less than 75 % of renewable energy, Installations of controlled ventilation systems with or without heat recovery. For further details on the application conditions and the amounts of such aids, as provided for by Law, please speak to our advisors at any of our branches or refer directly to the competent ministry : Ministère du Développement durable et des Infrastructures 18, Montée de la Pétrusse L-2918 Luxembourg Tel : (+352) Please note that some local authorities also offer such aids.

16 Take advantage of an interest rate advantage with etika The association etika "Initiativ fir Alternativ Finanzéierung a.s.b.l.", in cooperation with BCEE, offers interest rate advantages on loans to private individuals seeking to finance the construction or insulation of their home in compliance with certain environmental standards. This interest rate advantage, granted within the framework of BCEE s "EcoPrêt Logement" and "EcoPrêt Energie" loan offers, is linked to the financial aids granted to private individuals in application of the Luxembourg ruling of April 20, 2009 by the Ministry for Sustainable Development and Infrastructures. Financing your project using this mechanism results in a double advantage : 1. financial aids from the Ministry for Sustainable Development and Infrastructures (Ministère du Développement durable et des Infrastructures) and 2. etika interest rate advantage. The application conditions of the etika advantage are as follows : the interest rate advantage is applicable to an amount of above EUR 10,000 and below EUR 300,000; the maximum duration of the interest rate advantage is 10 years ; the offer for such an interest rate advantage is limited in time. If you wish to apply for an etika advantage or obtain further information on this offer and its conditions, please contact: 14 etika Initiativ fir Alternativ Finanzéierung asbl 55, avenue de la Liberté L-1931 Luxembourg Tel/fax : (+352) contact@etika.lu

17 5 % 4 % Tax matters 3 % ADVICE Speak to your BCEE advisor about tax benefits on insurances linked to your home mortgage! Besides direct financial aids, the legislator has implemented a number of tax incentives to encourage home ownership. You will find below an overview of the tax measures as at December 31, For further details on these indirect housing aids, we recommend that you contact our advisors in our branches or your tax office. The legislation in force shall be applicable. Deductions of debit interest You may deduct, in part or in full, the debit interest on your housing loan. The legislation provides debit interest deductions for the three following scenarios : -- -construction or renovation/refurbishment of a home to be occupied - by the owner, --purchase of building land, --acquisition of accommodation intended for rental. The procedures for such debit interest deductions depend on the intended use of the real estate asset the loan has been applied for. BHW Housing savings scheme Payments made into a BHW Housing savings scheme may be deducted from your taxable income upto an annual amount of EUR 672 per member of the household. Insurances The single premium for a credit life insurance covering the remaining balance of a housing loan in the event of death is tax deductible. The deductible amount depends on your age and the composition of your household (between EUR 6,000 and EUR 31,200).

18 Insurances Thanks to our partner La Luxembourgeoise, BCEE can offer you all insurances you may need for your real estate project. For your housing loan the following insurance coverages are recommended or even compulsory : Credit life insurance This insurance covers the outstanding balance of your debt and protects the family assets in case of death. Total or partial permanent invalidity insurance ADVICE Opt for the "LOGIconfort" package. It includes a housing loan along with all related insurances! You therefore have a single contact person for your loan and insurances. This insurance compensates any loss of income as a result of a partial or total permanent invalidity. "Globale Habitation" Home Insurance This multirisk home insurance covers your real estate asset against major risks including fire. Additional covers can be included in the contract to meet your requirements. 10-year liability insurance The 10-year liability insurance covers, for 10 years, respectively 2 years after the construction of a residential house, deficiencies in construction or materials. APROBAT lalux assurances, as the single point of contact in the event of a deficiency, helps settling problems arising from conflicts of interest between the different building trades and the delays that may result from those. Private third party liability insurance This insurance protects you and your family against the financial consequences of causing loss or damage to a third party. "LOGIconfort" Package We strongly recommend our "LOGIconfort" package, combining our various housing loans and the necessary insurance policies. "LOGIconfort" makes each step convenient as you will only have one contact person for your loan and insurance policies. 16

19 Practical advice You will find below a list of questions relating to your real estate project. This list is not exhaustive. Our advisors remain at your disposal to discuss any further issues and to provide you with practical advice relevant to your personal project. You are buying land: is the land in an authorised building area? what is the buildable gross floor area? what type of construction is permitted on this land? are there any compulsory construction deadlines? are there any easements? are connections to public utilities available (power, gas, telephone, water, sewage)? If not, what are the initial connection charges? is the price in line with the market price in the area, town and neighbourhood? how does the geographic location of the land compare with your usual commutes (work place, school, public transport)? what local facilities are available (shops, schools...)? what does the building permit cost? etc. You are buying an existing apartment or house: is there an energy performance certificate ( Energiepass )? if so, what energy category does the building fall into? does the building require any renovation in the near future? what will the cost of this work be? will this work require a building permit? what is the expert s opinion concerning the price and condition of the asset? in case of an apartment : - what resolutions were passed at the last co-owners meeting? - what are the shared expenses? - is any work on the building scheduled? If so, how will the costs be shared? - what rights and obligations result from the internal rules? etc.

20 You are buying on plan: into what energy category will the building fall? have you carefully read the specifications and are they comprehensive and complete? have you carefully looked at the construction plans and the contract? are the various works and their costs detailed in the contract? does the property developer propose an additional ten-year guarantee? is there a performance bond in case of failure on behalf of the seller? (only in case of vertical land survey ) when does the construction start and when does it finish? etc. ADVICE Before signing make repeated visits of the object of your desire, ideally at different times of the day and days of the week. It is better to take the needed time even if this means running the risk of missing a good deal, than to enter into a long-term commitment with an asset that does not really meet your expectations. You are building a house: would you rather manage the project yourself or have a turnkey project? in case of the first, do you have the necessary time and know-how to achieve a project of this scope? in case of the second, have you found a reliable architect to lead this project to completion? do the plans meet your expectations? do you already have the required permits? have you had an energy performance certificate issued ( Energiepass )? which energy category will your house be classed into and what is the estimate of energy costs? etc. Regardless of the nature of the project, before signing anything, go on site and ask yourself all the relevant questions. The local authority, the notary, the land survey office and the neighbourhood will provide you with answers to some of these questions. Once you have found your asset, make sure the building/land is described as precisely as possible on the pre-sale agreement. This would include the land survey indication, correct address and in case of an apartment, the accurate surface area. A sale pre-contract is usually limited in time (usually 30 days), may contain opt-out clauses to be negotiated and also includes in case of a housing loan, a suspension clause providing for cancellation of the contract if the loan is not granted. If you plan to finance your acquisition with a loan, it is vital that your bank figures in the pre-sale agreement. Upon hand-over of your newly built home make sure a hand-over statement is issued and signed along with the seller indicating the possible defects and uncompleted works. 18

21 Preparing your housing loan application To enable us to make a firm offer in the shortest possible time, your application file should be as complete as possible. You will find below a list of the necessary documents for your housing loan application. ADVICE Prepare your aaplication file carefully and include as far as possible all the required documents for your first appointment at a BCEE branch. The more complete your application is, the better our advise and the faster we can make a firm offer. 1) Purchase or renovation/refurbishment of a home : identity document and social security number of the applicant(s), proof of income (payroll or salary record, pension...), pre-sale agreement, photographs of the object, where appropriate, a quote for renovation/refurbishment costs, energy performance certificate ( Energiepass ) of the asset in case of purchase, annual income over 3 years prior to purchase (only in case of application for State aids) 2) Construction of a home : identity document and social security number of applicant(s), proof of income (payroll or salary record, pension...), notarised deed on land, or pre-draft thereof, plans, detailed quotes and where appropriate, specifications, energy performance certificate ( Energiepass ), annual income of 3 years prior to acquisition (only in case of application for State aids).

22 ADVICE If this is your first housing loan application, we recommend you make an appointment with one of our advisors in order to benefit from a personalised advice. Your online housing loan application via or via the Online Branch Other than the personal advice in one of our branches, you may submit your housing loan application via our website On our website, you will find all information about our housing loan offers alongside with our other products and services. You may also complete a contact form to arrange for an appointment with one of our advisors or refer to the list of branches. If you do not want to visit your branch, simply use the services offered by our Online Branch. You may contact our experienced advisors by phone at (+352) , at online@bcee.lu, Skype at the address "BCEE Agence Online". 20

23 Ten good reasons to choose BCEE 1 A trustworthy partner When entering a long-term commitment, such as a housing loan, it is vital to rely on a financial partner with solid fundamentals. BCEE is your obvious trusted partner in this area. ADVICE A commitment as considerable as a real estate investment can only be made with a trusted financial partner Number 1 BCEE has always been the leader in the field of housing loans in the Grand-Duchy of Luxembourg. Experience BCEE is active in the field of housing loans for over eighty years. Particularly attractive conditions BCEE applies very competitive interest rates and handling fees on housing loans. They are clear, transparent and there are no hidden costs! A complete range and personalised offers BCEE offers a complete range of housing loans. We can, therefore, develop a personal financing plan that is specifically suited to your individual situation and your project.

24 Comprehensive advice Our advisors will be pleased to guide you through available State aids and provide you with practical advice. Short decision-making time Time is essential when buying a home. You can count on our swift reaction. Flexibility When entering a long-term commitment there is always a risk of contingencies. Whatever unexpected events life brings we will always try to find a solution with you. A local service Counting 75 branches, 14 of which are finance centres, BCEE has the largest branch network in the country. Code of Conduct BCEE adheres to the voluntary Code of Good Conduct in matters of housing loan pre-contract information and delivers personalised and detailed advice. 22

25 BCEE A trustworthy partner for your housing loan

26 APPENDIX

27 Appendix I : Your personal financing plan Your personal financing plan relates the expenses connected with your investment to all of your resources. It gives you a first estimate of the amount you may be able to borrow and helps you in preparing your appointment with one of our advisors. All you have to do is, fill in the relevant data relating to your project and your personal situation. Our advisors will guide you through your financing plan and give you a more specific estimate of your financing possibilities. Costs related to your project Personal contribution Acquisition or construction costs Cost of land Landscaping costs Possible renovation costs Acquisition deed and registration fees Mortgage deed fees Architect s fees Building permit fees Utilities connection fees Credit life insurance premium Fitted kitchen Miscellaneous Total costs (T1) Own funds* Net revenue from sale of property * Housing savings scheme * Donations to receive * State aids and grants VAT discount Total personal means (T2) T1-T2 = Amount to be loaned Monthly income Monthly expenses + Net monthly income + Monthly income from rent payments + Monthly income from securities + Family allowances + Other monthly income Total monthly income (T3) - Existing loans - Housing savings scheme - Supports and other permanent expenses - Monthly instalments of new loan to be taken out Total monthly expenses (T4) Available income = T3-T4 Ratio Expenses / Income = T4 / T3 * available immediately