What Is the Loan-to-Value (LTV) Ratio and Why It Matters in Luxembourg

When you apply for a mortgage in Luxembourg or look at buying a property across the border, one term you’ll come across right away is the Loan-to-Value (LTV) ratio. It simply shows how much of a property’s price is covered by your loan compared to how much you pay yourself. Banks use it to determine how much they are willing to lend and on what terms.

In this guide, we will explain what the LTV ratio actually means, why it matters for buyers and investors in Luxembourg, and how it can vary in cross-border cases. By understanding how LTV really works, you will be better prepared to secure the right mortgage for your home or your investment.

What Is Loan-to-Value (LTV)?

The Loan-to-Value (LTV) ratio shows how much of a property’s price is covered by your mortgage. It is written in percentage form and helps both you and the bank see how much of the home you truly own and how much is financed.

Simply said, a higher LTV means you are borrowing more of the property’s value, while a lower LTV means you have put in more of your own money.

To find your LTV, divide your loan amount by the property’s value and multiply by 100. The result is your LTV percentage.

If you want to understand the calculation in more detail, check out our guide on how to calculate your Loan-to-Value (LTV) ratio before applying for a mortgage

Now, let’s take an example. If you are buying a home for €500,000 and your bank lends you €400,000, your LTV is 80%. That means the bank is financing 80% of the purchase, and you are covering the remaining 20% as a down payment.

In Luxembourg, the CSSF (Commission de Surveillance du Secteur Financier) sets clear limits on how high your LTV can go. The main aim is to keep the property market stable and prevent people from taking on too much debt. And the limits may vary depending on your specific situation:

• For first-time buyers can borrow up to 100% of the value of their home.
• Non-first-time buyers are usually limited to 90%.
• Buy-to-let or secondary homes are limited to 80%.

Some banks may lend a little more in some special cases, but these exceptions are tightly controlled and only apply to a small number of loans each year.

If you’re a first-time buyer, you may qualify for up to 100% financing. Here’s how the process works when buying your first home in Luxembourg.

Why Banks Care About LTV

Banks pay close attention to the Loan-to-Value (LTV) ratio because it helps them understand how much risk comes with a mortgage. When the LTV is high, most of the property’s value is financed by the bank, so the risk is higher for them if the borrower falls behind on payments. With a lower LTV means, the buyer has more of his or her own money in the property, which makes the loan safer for both parties.

Your LTV also affects the kind of mortgage terms you will be offered. The lower your LTV, the more favourable interest rate the bank may offer you. Because the risk for them is actually less. But if it is higher, you may get a higher rate or stricter lending conditions. It’s actually the bank’s way of balancing risk and reward.

A financial advisor can help you plan your down payment, compare offers, and reduce your borrowing risk before you apply.

In Luxembourg, these limits are not just a matter of policy. They are part of national rules set by the CSSF and aligned with European guidelines from the ESRB. The aim is simple that is, to keep borrowing responsibly, reduce household debt, and maintain stability in the housing market over time.

What Is a Good Loan-to-Value Ratio?

Most people are not sure what counts as a good Loan-to-Value ratio when they start planning a mortgage.

A good loan-to-value ratio is one that stays below the maximum limit for your type of property. The lower it is, the stronger your position when applying for a mortgage. Banks see lower LTVs as safer, which can boost approval a little easier and sometimes help you get better loan terms or lower rates.

In Luxembourg, the definition of a “good” LTV depends on the property. First-time buyers can borrow up to 100% for their main home, but non-first-time buyers are usually limited to 90%. For rental or secondary properties, the limit is 80%, meaning buyers need to contribute at least 20% of the purchase price themselves. Many banks consider an LTV around 70–75% to be a very comfortable low-risk range and a “good” loan-to-value ratio.

If you are investing across borders, see our guide on cross-border real estate financing for Luxembourg investors.

In Germany, banks tend to be a bit more cautious. Most prefer an 80% LTV or lower, so buyers should expect to put in about 20% of their own funds. For cross-border buyers in Luxembourg, these differences can affect how much financing is available and which bank might offer you the best fit.

Keeping your LTV lower benefits you as much as it does the bank. You will have a smaller loan to repay, more stable monthly payments, and a bit more breathing room if property prices change in the future.

LTV in Luxembourg and Cross-Border Mortgages

In Luxembourg, LTV limits are set by the CSSF, which ensures all banks follow the same lending standards. These rules help to keep borrowing responsible and maintain stability in the housing market.

And the system is a little more flexible in Germany. Each bank has its own limits based on the Beleihungswert, or the bank’s internal estimate of a property’s value. Since this figure is often lower than the purchase price, German banks usually lend more carefully.

For cross-border buyers who live in Luxembourg and purchase in Germany, these differences can affect how much you can borrow and the conditions you are offered. That’s where Smart Finance can actually help you by comparing lenders in both countries and finding the structure that suits your best interests.

How Smart Finance Helps You Improve Your LTV

At Smart Finance, we are here to help you make sense of your Loan-to-Value ratio and use it to your advantage. We take the time to understand your goals, deeply review your financial situation, and compare offers from banks in both Luxembourg and Germany to find the best solution that truly fits you. If refinancing could help lower your LTV or improve your terms, we will guide you through that process too. Our professional team is ready to help you make confident and well-informed decisions. Book an appointment with us today, and let’s plan your next step together.