Last Friday, we took stock of the financing plan for a mortgage and we explained the different types of loans that you can take out. In this second part, we bring together everything you need to know about warranties and insurances regarding home loans, as well as the tax benefits and potential state subsidies for the purchase, renovation and construction of a house.

Warranties and Insurances for Housing Loans

A mortgage warranty, also called a “real warranty” is usually the first warranty that your bank will mention. It enables it to seize and/or sell the property (or another asset specified before signing) in case you can no longer ensure the payment of your monthly credit obligations. This will allow the bank to reimburse the costs that it has already incurred. Please be aware that this warranty is only used in extreme cases, and after all other options have been considered.

A personal guarantee by a third party. This insurance guarantees to the bank that a third party will take over the repayment of your monthly obligations in case of payment default on your part.

The remaining balance owed or death/disability/occupational disability insurance: for your loved ones’ peace of mind. In the event of death, disability or occupational disability that would jeopardize your income and thus your monthly payments, the insurer will take over repayments to the bank. This thus avoids having to have a family member take over your credit. This insurance is strongly recommended. The outstanding principal and repayment period are not fixed and depend on the agency and the contract. Ask questions, and read the fine print! Our partner, La Luxembourgeoise, insurance specialist, will give you advice.

Salary Transfer

Less well-known, since it is longer and more laborious to set up, this allows your bank or credit establishment to directly collect your monthly payments from your salary. Your creditor will need to request this, and the salary transfer will only be applied after the judgement and authorization of court. Then, the employer will be notified and send a response to the magistrate, before the final acceptance is given, or not, for the salary transfer.

For more information: http://www.itm.lu/home/faq/ddt/remuneration/cessions-saisies.html

The complete article is only available in French.

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