Thierry Schuman, member of the management board and head of retail and corporate at BGL BNP Paribas, tells Delano that people often under estimate their financial leeway and are not always aware of just what the bank can offer.
Buying a home in Luxembourg can seem like a daunting task, especially if you listen to rumours that talk of massive deposits, suspect estate agency practices and general dodgy dealings. Most of this, although not all, is not true.
The Luxembourg property market houses a myriad of professionals--from banks and insurance companies, to estate agents and mortgage advisers, as well as lawyers and notaries to removal companies--who know exactly what’s what, and more importantly, what’s not. So, if you are new to Luxembourg, or just new to home buying in Luxembourg, don’t listen to gossip, talk to the professionals.
The best place to start, before you even click on an estate agent’s website, is the bank. There is very little point in setting your sights on a 5-bedroom house in the city centre, if your budget will only stretch to a 3-bedroom house 10km outside the capital.
According to Thierry Schuman, member of the management board and head of retail and corporate at BGL BNP Paribas, “This is indeed the best place to start. It is better to begin the search with a precise idea of one’s financial whereabouts and potential.”
His advice is, “Talk to the bank before committing to a purchase,” but it is not always about learning what you can’t afford. “While people sometimes over-estimate the amount they may borrow, just as often, they under estimate their financial leeway.”
Schuman also stresses that:
“A mortgage is about much more than just duration and interest rates… talk to the bank to get a real tailor-made proposal that will not only fit your needs of today, but also take your future plans and evolution into account.”
So, what can the bank do for you?
“Given today’s historically low interest rates, mortgage conditions are extremely attractive,” says Schuman. “The individual conditions depend upon the amount borrowed, how much of your own funds you can invest, the overall length of the loan and the choice of rate (fixed/variable). But as a general rule, the lower the risk for the bank, the lower the interest rates.”
Nowadays, mortgages come in all shapes and sizes including: variable interest rates, fixed interest rates, revisable fixed interest rates (after 5-10–15-20 years), capped interest rates and progressive instalments.
It is always worth talking to the bank, which can also offer: bullet loans, Schwäbisch Hall loans (building loans through a building society), credit protection and advice on state aid.
According to Schuman:
“Quite often, the final offer will be a tailor-made mixture of many of the above. Using our expertise, we strive to offer the best solution to every client, taking his personal situation and risk appetite into account.”
Among the rumours that frequently circulate is that, since the financial crisis, it is impossible to get a mortgage from a Luxembourg bank.
Schuman disagrees:
“It is neither easier nor more difficult than before the crisis as the financial criteria have not changed. However, given the stricter regulatory requirements that have arisen since the financial crisis, the process has unfortunately become more bureaucratic and therefore lengthy.”
So, what can buyers do to speed up this process?
“For a first meeting--and in order to speed up the process--customers should prepare their last salary slips, details of their personal financial situation and assets, and try to have a relatively precise idea on the project they have in mind.”