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Which financial aids to purchase or construct a dwelling in Luxembourg ?



Do you want to become a homeowner? Did you know that different aids are available to help you buy or build a house or flat in Luxembourg? What are they and under what conditions can you benefit? To find out, follow the guide.

Purchase or construction subsidy

This state aid may be obtained to purchase or construct a single-family home or flat. The amount of the subsidy ranges from EUR 250 to EUR 9,700. You must meet several criteria to grant this subsidy:

 - you legally reside in Luxembourg;

 - you have contracted a mortgage loan from an approved financial establishment in the European Union and the European Economic Area (AIEA);

- you satisfy certain income and family status conditions;

- you are not the owner of another dwelling in Luxembourg or abroad;

- the useful residential surface of your dwelling doesn’t exceed 140 m2 for a house and 120 m2 for a flat. For buildings constructed before 10 September 1944, there is no surface area condition;

- you must use the dwelling as your primary and permanent residence for at least ten years.

You cannot concurrently collect construction and purchase subsidies. However, you can combine each of these subsidies with the financial aid for special home adaptation for people with physical disabilities – 60% of the cost of works without exceeding 15,000 EUR -, savings bonus, interest relief and interest subsidy.

Savings bonus

You can receive up to EUR 5,000. This grant is indexed to the interest and bonuses on your housing savings account when obtaining the mortgage loan. To benefit from this savings bonus, you must meet two conditions. First, you have saved regularly for three years on a specific account with a starting capital of EUR 100. Second, you use at least 90% of this account to finance your housing.

Interest relief

If you have one or more children and have taken out a mortgage loan for your home's construction, acquisition or improvement, you can apply for interest relief. This aid in interest granted by the State allows you to reduce your mortgage rate by 0.50% per dependent child. However, it may not exceed the effective lending rate.

Interest subsidy

For all loans up to EUR 175,000, the interest subsidy allows you to reduce your monthly expenses by a rate between 0.575 and 2.45%. The rate of this interest subsidy depends on your situation and your level of resources.

Improvement subsidy

If you apply for a purchase subsidy, you can also receive the improvement subsidy for certain works to improve the habitability, hygiene and safety of your old housing. The subsidy will correspond to no more than 30% of the total amount paid for the renovation works and may not be greater than EUR 10,000 per beneficiary. In addition, the amount of the renovation subsidy is determined according to your income and family status.

Additional grant for architect or consultant fees

If you are the beneficiary of a construction or improvement subsidy, you can also combine it with the additional grant for architect or consultant engineer fees capped at 1,500 EUR.

How to apply?

To apply for one or several subsidies described above, you must use the application form for individual housing aid (downloadable on guichet.lu in French and German), complete it and send it to the Housing Aid Service¹.  Pay attention to the deadline! To be eligible for these subsidies, you must apply at the latest one year from the date of purchase of the dwelling, the completion of the renovation works or the first occupation of the newly built home.

State home loan guarantee

Under certain conditions, the State can help guarantee your real estate loan:

1.    You must have had a housing savings account with a bank for at least three years, which you have funded with regular deposits (minimum EUR 290 per year).

2.    Your monthly loan repayment must not exceed 40% of your available income.

3.    Your loan, guaranteed by a mortgage, must cover at least 60% of the total amount.

To apply, you must use the aid application form for individual housing aid (downloadable on guichet.lu in French and German). It must be completed and signed by your financial institution and then sent to the Housing Aid Service.

Refund of VAT

The Luxembourgish State offers a super-reduced VAT rate of 3% on the construction and renovation of housing, provided you use and own the property as your principal residence. The reduced rate is directly applied in the invoices or the difference between the normal VAT and the reduced rate is reimbursed. The total amount of the tax benefit must be no more than EUR 50,000 per newly built or renovated home.

Bëllegen Akt

In case of your first real estate purchase in the Grand Duchy, you can benefit from a tax credit of up to EUR 20,000 per head on the notary fees (“Bëllegen Akt”).

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¹ Housing Aid Service, 11 rue de Hollerich, L-1741 Luxembourg – (+352) 8002 10 10 – [email protected]