A guiding light

What explains this growing trend in a country where customers tend to be very loyal to their bank? For Vincent Quillé, Managing Director of Nexfin, a Luxembourg-based mortgage brokerage company, this change of habits is mainly down to rising property prices.“Given today’s property prices, even the smallest saving is very welcome,” explains this mortgage structuring expert. It can also be explained by the highly diversified financing offer in Luxembourg, which is difficult to get to grips with on your own. Using a mortgage broker therefore not only allows you to obtain a mortgage with favourable terms but also to take advantage of advice from a seasoned professional on a very complex subject. “It's often the financial project of a lifetime,” he explains. Hence the importance of not playing it by ear.

Assessing your purchasing power

Before you start looking for your new home, you need a clear picture of the type of property you can afford. A broker can help you with this initial assessment. This is not the time for rough estimates: “Borrowing capacity shouldn’t be mistaken for purchasing power.”  It is important to make sure you factor in the additional costs (insurance, registration and solicitors’ fees), as these amounts must come from your savings and vary considerably depending on your situation. So, depending on your buyer profile (first-time buyer, investor), your income, your debt ratio and your risk appetite, the mortgage broker can determine the maximum amount of your purchase. You can assess your purchasing power or the feasibility of a concrete home-buying project yourself on the Nexfin website.

More to it than just the interest rate

Vincent Quillé believes that customers tend to focus too much on the interest rate alone. Whereas by “taking a good look at the financing structure, it is sometimes possible to bring down the total net cost of the mortgage by up to 30%” he explains. That is why the first task for any mortgage broker is to challenge preconceived ideas.  “Customers come along with an idea of the type of financing they want. They know, for example, that they want to borrow at a fixed rate. Without realising that, in the event of early repayment, they are setting themselves up for significant penalties that they could have avoided with a more suitable financing structure.” So taking the time to precisely define the contours of your property purchase and your life project allows us to come up with the best solution. In fact, you can never be too careful, as "In Luxembourg, you can take just about any risk you want when it comes to financing property. That's why it's important to weigh up the different scenarios to find out what would happen if rates soared or if you were to sell in 4 years' time.”

The art of orchestrating tax deductions

In Luxembourg, interest on mortgages taken out to purchase your primary residence is tax deductible, as are the insurance costs. An advantage that can lead to significant savings as long as you seek specialist advice. For example, by deciding to pay the insurance of your mortgage as a single premium, you could save up to 40% of the total premium amount in tax. However, “these trade-offs can’t just be dashed off on a paper napkin,” explains Vincent Quillé. This gave the entrepreneurial young managing director the idea of developing his own mortgage calculation tools adapted to the Luxembourg legal framework.

What are the advantages of using a mortgage broker?

• A single appointment leads to several offers. You no longer need to go round the banks to compare offers, saving precious time.
  
• You benefit from more favourable conditions.
  For a bank, a broker represents a significant volume of potential customers. That is why banks tend to offer better conditions to a broker than to a private individual. What’s more, requests are handled by a dedicated department at the head office of each bank, which facilitates the relationship.
  
• You get your mortgage offers in just a few days.
  Because a dedicated team means a quick response. You receive the various mortgage proposals within three days on average.
  
• You have access to all the available formulas.
  Some banks offer mortgage terms of up to 35 or 40 years. Others offer only one type of rate. By consulting the majority of Luxembourg banks all at once, you have the full range of options available to you.
  
• It's free.
  The mortgage broker is remunerated by the bank from which you decide to borrow.
  If you don’t opt for any of the offers received, you don’t owe the broker anything. So you are not bound to them. You save time and money without any financial outlay.

How to choose your mortgage broker and how does it work?

The criteria to consider when choosing a mortgage broker are undoubtedly their ability to listen and explain. Calculation tools are not everything. Above all, you need a relationship based on trust. At your request, the broker you have contacted will invite you to an appointment. One to two hours are generally necessary to get a firm grasp of your project. At the end of this appointment, the professional will suggest that you sign a mandate. Less than a week later, they should have several offers from the banks to propose to you.

What about outstanding balance insurance?

Outstanding balance insurance is an important protection often required by the lender when taking out a mortgage. Even though most banks offer it, the best solution is to turn to an insurance company to benefit from the most competitive rates.