The application file
For most future house or apartment owners, it is necessary to take out a property loan contact with a banking or financial institution in order to obtain the required funds to finance their project. This is a step that requires an understanding of the process involved in an application for credit, as well as being properly prepared, as a responsible and well-informed individual.
Before seeking to purchase a property, it is necessary to have a good credit profile of a duration of between 2 to 5 years. A background of regular payments of monthly bills, the absence of overdrafts on one’s account and consumer credits paid (if possible) are some examples of good starting points. You also need to have found the property of your dreams and to have made an offer to the vendor, subject to obtaining bank credit.
Banks seek reassurance that their future clients will be able to live and support themselves alongside the loan to be repaid, on the one hand, and on the other hand, they seek to limit the risk of loaning too much or risky loans.
The first point consists of limiting the level of indebtedness of future property purchasers. The rule is that the monthly cost of the property loan should be restricted to 33% of net income. The standard practice is thus to ascertain whether the client will be amble to continue to meet their family expenditure requirements.
Le second point relates to having a credit profile with banks, not having overdrafts during the preceding year and, if possible, paying off open-ended credit or consumer loans.
By preparing an appropriate application file, it will become easier to obtain credit and to negotiate the arrangements for the loan.
The documentation generally required is the following:
- Attestation of entitlement to accommodation (Luxembourg Ministère du Logement [Ministry of Housing])
The more realistic the proposed purchase, the more likely it is that the client will be accepted. It is desirable to reduce the duration of the loan, by increasing the level of personal contribution or by deferring renovation work, if appropriate. Finally, note that the average duration of the period of property credit in Luxembourg is 20 yeas for those under 35, and 10 years for those who are older.
Finally, in order to negotiate a loan under favourable conditions, it is normal practice to present oneself to a number of establishments, to compare banks and options and rates available, and to take advantage of competition.
Emilie DI VINCENZO