Costs associated with purchasing real estate

Are you a resident or future expat in Luxembourg looking to buy a property there? How much will this purchase ultimately cost you? Do you have questions about notary fees, registration fees, and mortgage costs?

Here you’ll find all the answers to your questions about the costs involved in purchasing a new property. This will allow you to plan the purchase of your dream home in Luxembourg with peace of mind.

Notary fees for a real estate purchase in Luxembourg

When purchasing real estate in Luxembourg, additional financial costs, known as “notary fees” or “notarization fees,” must be factored in on top of the sale price of the home or land. In fact, on the day the purchase deed is signed at the notary’s office, it is the buyer of the property who must pay these additional fees to the notary. The seller of the property does not contribute to these notary fees.

These registration fees amount to 7% of the property’s price. They consist of 6% in registration fees and 1% in transcription fees.

Calculate below the notary fees to include in your total budget for purchasing your new property.

Reduced registration fees and Bëllegen Akt

Registration fees in Luxembourg

When purchasing a property, the buyer must pay registration fees to the notary on the day of the sale. These are calculated based on the value of the land and the structures on it. These registration fees amount to 6% of the purchase price of the property.

“Bëllegen Akt,” tax credit for a primary residence

However, thanks to the “Bëllegen Akt,” the new buyer may be eligible for a tax credit on these registration fees. Currently, these costs can be reduced by up to 40,000 euros per person, or 80,000 euros for a couple.

These reduced registration fees are reserved for individuals purchasing real estate in Luxembourg to use as their primary residence. To qualify, the new buyer must commit to personally residing in the property for at least two years. In the event th ly rents out the property or resells it before these two years have elapsed, the buyer must reimburse the full amount of the reduction granted.

If the full amount per person is not used during the initial purchase of the primary residence, the remaining balance may be used for a subsequent purchase until the special tax provision expires.

Reduction in notary fees for rental real estate investments

To boost investment in new real estate in 2024, a new tax credit called “Bëllegen Akt Investisseurs” has been introduced. It allows investors in off-plan rental properties to benefit from a reduction in notary fees of up to 20,000 euros per person. To qualify, the investor must rent out the purchased property for at least two years. This measure applies retroactively to all purchases made on or after January 1, 2024.

Notary fees for a real estate sale

The sale of real estate in Luxembourg must be formalized before a notary. A Grand Ducal regulation sets the amount of the notary’s fees for completing the transaction.

These fees amount to 1% of the purchase price (land and buildings).

In addition, the notary also bills for the costs incurred by their office to complete the real estate transaction. Indeed , the notary’s office must request cadastral extracts and collect all other necessary administrative documents to facilitate the sale. This includes, for example, account statements from condominium associations, any mortgage statements, etc.

VAT Applicable to Properties Under Construction

In Luxembourg, when purchasing a property under construction (VEFA), the buyer must pay value-added tax (VAT) on the property to be built.

The VAT rate applied depends on the buyer’s status.

VAT applicable to the purchase of a primary residence

If the buyer purchases a property (apartment or house)with the intention of making it their personal primary residence, they will benefit from a reduced VAT rate of 3% on the portion of the property still to be built at the time of purchase.

However, this benefit is limited to a tax break of 50,000 euros. Above this amount, the notary will apply a rate of 17%.

VAT applicable to the purchase of a rental property in Luxembourg

An investor who purchases a property under construction with the intention of renting it out will not be eligible for this tax benefit. They will automatically pay 17% VAT on the entire portion of the property still to be built.

Please note: generally, the prices listed by developers in real estate ads for new buildings are based on a 3% VAT rate. The investor will need to recalculate the final price using the 17% VAT rate.

The same principle applies when carrying out renovations on one’s primary residence.

Cost of a mortgage to purchase a home

When you take out a loan from a bank to finance your new real estate purchase, you will also have to pay financial fees. These are added to the total cost of your purchase.

Cost of financing your new property

If you cannot finance the entire purchase of your property with your own funds, you can apply for financing from a bank or financial institution. After reviewing your personal file and your ability to repay, the lender will provide you with a certain amount so that you can finance your purchase. Generally, a bank will lend you up to 30% of your income

In return, you will need to make monthly loan payments,taking into account the interest charges to be added to the principal being repaid.

You must also add the amount of fixed application fees.

You must factor these fees into your calculation of the total cost of purchasing your property. However, please note that you may be eligible for tax deductions on these fees when purchasing your primary residence.