October 4, 2023

Mortgage: 6 good reasons to use a broker

With property prices soaring, interest rates tripling and increasingly cautious banks, getting a mortgage to buy your own home has become a real obstacle course. So why not maximise your chances of success by using a broker? It is free and very effective.

un jeune couple en rendez-vous avec un courtier immobiler

Obtaining a mortgage in Luxembourg has become increasingly difficult since the successive crises related to Covid and the war in Ukraine. As house prices continue to rise, the cost of financing has tripled and lenders are becoming increasingly cautious, demanding more guarantees and larger down payments from borrowers. Today, refusals are commonplace. In this turbulent environment, the mortgage brokerage market is booming, and more than 10% of Luxembourg residents already using the services of a finance professional to buy their home. And for good reason: their services are generally free for the borrower, and greatly simplify the task. Spotlight on the main benefits of using a mortgage broker.

1.       Better chances of getting your loan

Many potential homeowners overestimate their current purchasing power, because the property market has changed over a very short space of time. With the same income, a household that could borrow EUR 1 million two years ago can now borrow only EUR 700,000, as ancillary costs (insurance, registration and notary fees) must be financed by personal savings. As a result, potential borrowers are turned down time after time by banks, and end up despairing of finding a suitable home.

A broker can help you avoid one disappointment after another, by first accurately assessing your purchasing power. It’s not as straightforward as it might seem: you need to take into account a number of factors, including of course, your income, but also the stability of your job, the strength of your savings, your debt ratio, your investment profile and your property assets. A precise analysis of these factors will determine the ceiling for the property you can buy, enabling you to target your search more effectively. In the meantime, you can already conduct a first online simulation of how much you can borrow using the credihome calculator.

Negotiating with banks is no easy task. And in this area, a professional credit broker is bound to be more convincing than you. Backed by well-established relationships with their banking partners and their decision-makers, they will be able to defend the strengths of your application based on the specific requirements of each lending organisation. So you can maximise the odds in your favour…

2.       Substantial savings on the cost of your loan

In Luxembourg, the services of a broker will generally not cost you a cent, since they are paid for by the lending bank. However, they can save you a lot of money. As a professional negotiator, they can help you obtain the best terms and interest rates for your loan. Not insignificant when you consider that rates are nearing 4.5% in 2023 and could rise further.

Keep track of interest rates here.

Although perspective buyers focus exclusively on interest rates, it is not the only factor that influences the total cost of borrowing. For example, a household that wants to borrow at a fixed rate does not necessarily consider that if it sells the property before the end of the mortgage term, it will be exposed to significant financial penalties… More difficult for individuals to control than interest rates, the structure of the loan is just as essential. By optimising the combination of the four possible financing methods (home savings, fixed rate, variable and adjustable rate) to structure the overall loan, a broker can offer their clients a deal whose costs are generally lower than the deal they would have chosen on their own.

3.       Saving time and simplifying procedures

With the help of a broker, there’s no longer any need to run around the banks and prepare a whole host of applications based on the requirements of each one, also no more waiting for answers for weeks or even months on end! All it takes is one meeting with your broker to understand your project and analyse your situation. In just a few days, they should be able to offer you several banking packages, which they will help you compare. This saves you a considerable amount of time, not to mention the fact that a clear vision of your purchasing power will save you a lot of wandering around the property market…

Everything is also much easier through a broker, who will become your single contact person, carry out a number of steps in your place, manage your file and support you until you sign the purchase contract.

4.       A clear view in a complex environment

Every bank has its own requirements and specifications: some offer loans that can last up to 40 years, others offer only one type of rate… In a credit market as sophisticated as Luxembourg’s, non-specialists have a hard time finding their way around, and risk opting for a loan that is ill-suited to their life plans, with all the financial risks that entails. This is one of the main reasons why Luxembourg residents are increasingly turning to brokers: they quickly give them a clear view of the whole range of possibilities, in an extremely complex and risky environment where you have to juggle a host of concepts and possible scenarios: variable rates, home savings, associated costs, early repayment, partial repayment, early resale, tax, penalties, etc… To make the best choice, on the best terms.

5.       The best tax deduction for insurance

In Luxembourg, insurance costs, interest paid on mortgages and amounts paid into a home savings plan are tax deductible if the property is your primary residence, however various formulas exist. Mastering these mechanisms is part of a broker’s job, and can save you a great deal of money. In some cases, for example, you can save up to 40% on the tax credit insurance premium through the single premium mechanism.

6.       Renegotiating an existing loan

Few borrowers have this reflex, yet… A broker can also help you renegotiate the terms of a mortgage you are repaying, when it is no longer suited to your needs. For example, you could transfer part of your loan from a variable to a fixed rate, extend the payment term to reduce your monthly repayments or, conversely, shorten it to obtain a better rate, refinance your loan by having it taken over by a rival bank, etc. All it takes is one appointment to assess your options… and it’s free!

A property purchase or refinancing project on the horizon? Do not hesitate to contact a credihome broker, they will be able to advise you.

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