How to Buy Property Abroad with a Cross-Border Mortgage from Luxembourg

Cross-border mortgage options are becoming more common for people living in Luxembourg, especially those who work in the country but plan to buy property in Germany or France. 

With high-rise property prices in Luxembourg, more buyers are looking just across the border, where homes are often more affordable and offer more space. And the most confused part is not the paperwork, but it is deciding where to buy and making sure the numbers work. 

In this guide, we’ll walk you through what a cross-border mortgage actually means, and it will help you understand how cross-border mortgages work before you commit.

Understanding Cross-Border Mortgages

A cross-border mortgage is a loan that particularly involves two countries. For example, you might live and work in Luxembourg, but you are planning to buy a house or property in Germany or France. In that case, your loan might come from a Luxembourg bank or from one in the country where you are buying the property.

This setup makes a lot of sense for many people in Luxembourg. Since housing prices are high in Luxembourg, it’s no surprise that more buyers are looking just across the border, where homes tend to be more affordable. Some banks are already familiar with this situation and offer cross-border loan options specifically for people living in Luxembourg and buying abroad.

How is it different from a regular mortgage?

With a cross border mortgage loan, the process usually involves more paperwork and needs a bit more coordination. The bank has to check things like your income, taxes, and credit history in one country, while the property is located in another. Also, legal and tax rules may differ, and in some cases, there are currency considerations too.

Additionally, you might be asked for extra documents, like proof of stable income in Luxembourg, a residence permit, or insurance coverage that meets the rules of the country where you are buying.

It’s not always simple, but it’s definitely doable. With the right support, plenty of people in Luxembourg are getting mortgages to buy homes across the border and making the most of their income and location.

Luxembourg is not just helping people get mortgages across the border, it’s also an important player in European lending. A large share of cross-border loans within the eurozone flows through the country, especially those involving financial institutions. And with the introduction of AIFMD II in April 2024, the rules for loan funds across Europe are starting to line up. That makes it easier for banks and borrowers alike, and could open up more consistent mortgage options for buyers looking to purchase property in Germany or France from Luxembourg.

How Does a Cross-Border Mortgage Work in Luxembourg?

In Luxembourg, where many people commute from neighbouring countries or consider buying just over the border, this kind of setup is quite common. As mentioned earlier, it is a loan built for situations where you earn in one country but plan to live in another.

Many banks in Luxembourg are familiar with this, and they offer plenty of cross-border loan options today, specially for people with a stable job and regular income. For that, you will need to show documents like recent payslips, a work contract, basic proof of your financial situation, etc.

Banks usually start by checking your job situation in Luxembourg. They want to see that your income is steady, you are not carrying too much debt, and you have some savings set aside, usually around 10% to 20% of the property price.

Some lenders might ask for a little more security. That could mean showing other assets you own, or agreeing to something like a wage assignment, where part of your salary can be used to cover the loan if things go wrong. It is not meant to make things difficult, but it is just how banks protect themselves when lending across borders.

You can borrow from a bank in Luxembourg or from one in the country where you are buying. Many buyers choose a Luxembourg bank because these lenders tend to understand the needs of cross-border workers. But it is always worth comparing your options. Interest rates, fees, and repayment terms can vary quite a bit. Monthly repayments are the norm.

Since you’re dealing with two countries’ legal systems, it helps to talk with someone who knows how cross-border financing works on both sides.

Cross-Border Mortgage Options in Luxembourg

There are several mortgage options you can consider, and what works best will completely depend on your income.

Fixed-Rate Mortgage
This type keeps things simple. The interest rate stays the same from start to finish, so your monthly payments would not change. It is predictable and it makes budgeting easier, even though the rate is usually a bit higher compared to other types.

Variable-Rate Mortgage
With this one, the interest rate may go up or down depending on the market conditions. You might pay less when rates are low, but you will also need to be prepared in case they rise. It is an option for those who are okay with some fluctuation in their payments.

Adjustable-Rate Mortgage
Here, you get a fixed rate for the first few years, typically 3, 5, or 10. After that, the rate is revised, often becoming variable. This could be a good fit if you expect your finances to improve in the near future or if you think you might refinance later on.

Mixed-Rate Mortgage
This is actually less common, but some lenders allow you to split your mortgage so that part has a fixed rate and the other part has a variable one. It is a way to balance the pros and cons of both approaches.

The type of mortgage you can get will depend on a few things, such as your salary, monthly spending, credit history, how much of a deposit you have, etc. Most lenders expect at least 10% to 20% of the property’s price upfront. Mortgage terms in Luxembourg usually go up to 30 years, but for younger buyers, some banks might offer terms up to 40 years. It is highly recommended to seek expert advice from a cross-border financial consultant before taking part.

How to Apply for a Mortgage in Luxembourg

Getting a mortgage in Luxembourg is not overly complicated, but it is pretty manageable once you know the steps.

Get Your Documents Together

The first thing is to gather the paperwork that most banks will ask for. This usually includes your recent payslips, proof of employment, tax returns, proof of where you live, and documents about the property you want to buy, such as the purchase agreement or energy performance certificate. Since it is a cross-border investment, you may need a few extras because of legal or tax differences.
It also helps to have a clear picture of your own budget and to decide what kind of loan you can truly handle, and what type of mortgage suits you best.

Pick a Lender

You can apply directly through a bank or through several online options available today. Most of the banks offer tools on their specific websites where you can estimate loan amounts and monthly payments before applying.
However, many buyers choose to work with a mortgage broker instead. They can help you with comparing different offers and may even negotiate better conditions on your behalf.

Tip: Before you speak with any of them, a lender or a broker, try a mortgage loan calculator to estimate your monthly repayments, check your borrowing power, and compare different interest rates. It is an easy way to get a clear picture of what you can afford.
Looking for expert help? Contact our mortgage broker in Luxembourg or book a free consultation today.

Send in Your Application

Once you have picked a lender, now is the time to apply. If you are doing it online, you will usually fill out a form and upload your documents. Some banks might schedule a follow-up call just to go over the details. If you would rather apply in person, it’s a good idea to book a meeting with a financial advisor who can help you complete the mortgage application and guide you through the paperwork.

Review the Loan Offer

After the bank reviews your application and property details, they will decide whether you qualify for the mortgage loan. If you are approved, you will get a formal loan offer, including the amount you can borrow, the interest rate, the repayment plan, and other specific conditions.
You will have a time of two to four weeks to review the offer and accept. So, take your time and make sure you understand the terms before you move forward.

Final Steps with the Notary

Once you have accepted the offer, you will pass it along to the notary who is handling the property purchase. They get ready the legal documents for both the loan and the transfer of the property. On the final day, you will meet with someone from the bank and the notary to sign everything. After that, the mortgage is official and the home is yours.

Why Choose Smart Finance for Your Cross-Border Mortgage?

At Smart Finance, our team of experts focuses specifically on helping people living or working in Luxembourg buy investment property or residential homes in neighbouring countries like Germany or France. We are here to walk you through the process, answer your questions, and make sure nothing gets missed along the way.

One thing that makes us stand out is nothing but our ability to help clients secure up to 100% mortgage financing. So even if you don’t have a large deposit saved, you may still be able to move ahead with your plans.

We also work closely with a wide network of banks in both Luxembourg and Germany. So, we can connect you with lenders who already understand the unique situation of cross-border buyers. As one of the leading real estate financing company, our dedicated and licensed teams of professionals don’t just pass you a list of options, instead, we take time to understand your situation and help you find a solution that actually fits.

If you want support from people who know what they are doing and take your goals seriously, we are just one meeting away.