How to save on your mortgage?

Actively looking for a new place to buy in Luxembourg? Maybe you have already tried some loan simulations with a couple couple banks? Now is the time to save money: Did you know that you can actually optimize your mortgage to save several tens of thousands? Here is how:

1. All the fees that can be optimized on a home loan

While the concept of a mortgage may seem simple, its anatomy is actually more complex: it contains several fees that can all be optimized. Here they are :

• The contribution: you can maximize your contribution by optimizing your tax return each year. The more you increase your contribution, the less you will have to borrow, and therefore the less interests you will pay to the bank;
• The insurance: the loan insurance is also an important lever of optimization. The amount you pay is a percentage of what remains to be repaid: so it can cost a lot!
• The interest rate: it is the core of your mortgage optimization strategy. Let us explain it to you right away!

2. Getting the best interest rate for your mortgage in Luxembourg

The interest rate is a percentage of the sums remaining to be repaid to your bank. It determines the amount of fees you pay the bank for its service. You can understand that making tiny adjustments can lead to huge savings over time.

Example: Let’s say you borrow 800,000 € over 30 years with a 1.35% fixed rate. If you manage to reduce your rate to 1.25% (which is only 0.1% less), you would actually save 13 584€ on the whole duration of your home loan. Not bad, right? This would pay for nice furniture!

To determine the best rate on the market, the only way is to compare several bank offers.

3. Why should you get several offers to get the best rate ?

Each bank has its own specificities and will offer different interest rates according to your profile. Here are examples of what banks ask themselves when studying profiles everyday:

• What type of contract do they have? What type of job do they have? (self-employed, public service, executive…)
• What is their lifestyle? What are their daily expenses? What are their current credits?
• Are they more of a thrifty or spendthrift type?
• What is their current savings and potential contribution?

This is why we strongly recommend to compare banks: you might realize that some banks are more enclined to get you the best rate, only because they are looking for clients like yourself.

4. How to find the best interest rate for your mortgage

Now you know it: the secret lies in making banks compete with each other.

Here are two options to do so:

• Go knocking on every bank’s door and compare offers: if you are comfortable with banking terms, interest rates and other insurances, we suggest that you go directly to each of the banks in Luxembourg and be your own advocate. However, be careful with the time that these meetings and comparisons will take you. Also, you could refuse an offer and finally regret it afterwards.
• Go with a broker to compare fees, and get a free “all-inclusive” service. A broker’s job is to sell your profile to every bank in Luxembourg to get you the best rate and conditions. This requires financial knowledge and special personal accesses to negociate the best deal every time. to entrust this work to a professional! Moreover, you get personal advice to optimize your mortgage. In short, you save time and money. To find out more, click here.