Buying a property: watch out for hidden costs!

As a buyer, you must bear all costs related to the deed of sale and notary costs. These expenses include the remuneration of the notary, the reimbursement of the expenses incurred by the notary's office for the services and documents necessary for completing the sale, as well as taxes.

These relate to registration and transcription fees due to the Luxembourg Registry and amount to 6% and 1% respectively for acquisitions for value (subject to payment). You can however benefit from a tax credit, immediately applicable when signing the deed of sale and capped at 20,000 euros (40,000 euros in case of joint acquisition) if you buy a building for personal housing purposes. This tax credit may be used gradually on subsequent acquisitions, until it is exhausted and is granted to you whether you are a resident or not (provided of course that you committed to residing in the acquired building). If you are a non-resident living in a European Economic Area[1] member country, you will need to pay the registration and transcription fees and claim the tax credit upon presentation of a certificate of residence in Luxembourg thereafter. 

In any case, you are required to personally occupy the dwelling within 2 years (4 years if it is a building plot or a building under construction) from the date of the notarial deed of acquisition, for at least 2 continuous years. Otherwise, you will have to repay the entire allowance.

If you have to borrow in order to buy your property, your credit institution will require a mortgage that will allow it to sell the property and recover the amount owed in case you have difficulty repaying the credit and all amicable solutions have been exhausted. This mortgage must be registered in one of the Mortgage Offices in Luxembourg by notarial deed, which gives rise to additional notary fees.

At the time of the provision of your loan, your credit agency will charge an administration fee. In general though, these are not very high.

The law does not require you to subscribe to these two types of insurance but they are recommended and often required by the institution that grants you the mortgage. Home insurance covers your home, as well as the furniture and your personal effects against the risk of fire, water damage, burglary, broken windows and storm damage. Remaining balance due insurance is a form of temporary death insurance taken out as part of a mortgage. If you die prematurely, it allows you to repay the balance to your credit institution and protects your partner or heirs from any financial problems. 

If you are planning renovation or construction works and do not wish to start repaying your mortgage until after a certain period, consider the interim interest. This is calculated on the basis of the amount borrowed (or actually used in the case of a new construction) until the beginning of the repayment. 

Lastly, remember to keep a budget for all costs after acquisition, such as landscaping to make the place to your taste (painting, flooring, partitions to knock down, attics to convert etc.), moving expenses, possible furniture to buy back or joint ownership fees if you bought an apartment in a residence.

For more information, see www.ing.lu/immo or visit our agency.

[1] The European Economic Area brings together the 28 Member States of the European Union, Iceland, Norway and Liechtenstein.