About this model and its assumptions
Our capacity and feasibility tool for property projects automatically calculates the property you could buy, or gives you a feasibility opinion on the property you wish to buy, taking into account the number of borrowers, your family status, your monthly net income and monthly debt charge, as well as your personal down payment. The result of this tool cannot be considered as a right to a mortgage, but as an assessment of your possibilities. Our tool is calibrated around the lender conditions for properties and borrowers based in Luxembourg and Each simulation must be reviewed by a credihome adviser to validate the results on a case-by-case basis upon request via our contact form.
Our model assumes that banks accept a debt ratio of borrowing costs, all debts combined, to net income of 40% to 45%. In addition, banks generally do not grant a mortgage if your monthly remaining income, after deduction of all your monthly debt charge payments, is less than € 1 700 if you are single or € 2 300 if you are married, with a supplement of € 300 per dependent child.
Beyond the debt ratio, banks require a down payment corresponding to:
- 10% of the acquisition price for a primary residence and 20% for a buy-to-let investment. One major exception is the acquisition of a primary residence for first time buyers.
- The sum of all ancillary costs, that means the acquisition costs and the mortgage opening costs. Those costs include registration fees (after deducting the € 40 000 tax credit per co-borrower on a primary residence, € 20 000 on a buy-to-let investment, if this credit is still fully or partially available), notary fees, other notary fees and bank charges.
Registration fees and notary fees are set by the Luxembourg state and depend on your personal situation, the price of the property and the amount of the mortgage. For the purposes of our calculator, we consider that the value of the land is 35% of the total price of a new property (off-plan).
The other notary fees include the applicable VAT on the notary fees as well as the other expenses and disbursements that the notary will charge to record the transfer of ownership (+/- € 1 000) and the registration of the mortgage (+/- € 500). These expenses and disbursements invoiced by the notary may vary slightly depending on the specific situation of your property purchase. However, our estimate should be very close to the actual price you will pay.
The bank charges correspond to the one-off commission that banks generally charge when granting a mortgage loan. We estimate this commission at € 1 000 although it may vary from one financial institution to another.
Although you are obliged to contract a mortgage insurance when you finance the acquisition of your property through borrowing, we have not considered the payment of a single premium as a property acquisition ancillary cost. An additional budget will have to be provided for it if the insurance is paid as a single premium, otherwise it can also be paid as an annual or monthly premium.
This amount can however be reduced depending on your personal situation or any additional guarantees that you are able to provide. Our model will give you an opinion and advice on the contribution to be made to ensure that your project can be carried out under the best possible conditions.
Financing related to the acquisition of a primary residence for first time buyers with:
- A down payment below the ancillary costs will be considered impossible.
- A down payment between 0% and 5% of the acquisition price plus ancillary costs, will be considered risky to obtain a financing agreement as few banks will accept it.
- A down payment between 5% and 10% of the acquisition price plus ancillary costs, will be considered feasible by most banks.
- A down payment of 10% or more of the acquisition price plus ancillary costs, will be considered comfortable as it is acceptable by all banks.
Financing related to the acquisition of a buy-to-let investment with:
- A down payment of 20% or more of the acquisition price plus ancillary costs, will be considered comfortable
If a financing is considered impossible when assessing the feasibility of a project, this may also be due to a debt ratio that is too high and/or an insufficient monthly remaining income. The tool will then suggest a minimum monthly income or personal down payment that would make the project feasible.
Although it may be possible to go beyond this, our model considers that the duration of a loan should be at most 30 years for the financing of a primary residence and 20 years for the financing of a buy-to-let project. We recommend that borrowers calibrate the duration of their loan in such a way that the last repayment will be made no later than the age of 65. Our model will therefore recommend a maximum loan term in order to comply with these two conditions.