Making good use of your home savings

Blog 1 January 2016

Are you planning a real estate project in the future, in the medium or long term? Opt for a housing savings plan. Intended for any person whose objective is a real estate purchase, these savings aim to facilitate access to property by building up capital. The purpose of a housing savings contract is to allow a future buyer to benefit from a loan with advantageous conditions to finance their own home. The contract must be taken out in order to finance the construction, acquisition or conversion of an apartment or a house as their main residence, including the price of the land. Overall, a home savings contract is generally divided into two stages: a "savings" stage and a "loan" stage. During the savings phase, you save part of the sum required to finance a real estate project. THE SAVINGS PHASE First of all, you should know that home savings accounts are managed by home savings banks approved by the Luxembourg government (or paid to an approved savings bank in another European Union country). If you take out a home loan contract at your bank, the bank will contact a partner savings bank. There are several of these in Luxembourg. You can also open a home savings account directly with an approved savings bank. During the savings phase, you build up capital that will eventually allow you to borrow at a fixed, advantageous rate for a property purchase. Once the contract is signed, the interest rate conditions for both the "savings" and "loan" parts are fixed once and for all. These savings are thus risk-free. They are a secure investment. The payments placed on your savings account will generate guaranteed interest which will increase your savings as time goes by. Payments are unrestricted and flexible. During the savings period you can also make additional payments at any time. The contributions paid under a savings contract are, under certain conditions, tax-deductible. These contributions, together with the interest paid, are deductible up to a maximum of 672 euros per year. This limit is increased by its own amount for the spouse (or partner) and for each child in the taxpayer's household. That is 672 euros per member of the household. A home savings plan is taken out for a period of 10 years. After 10 years, the balance of the savings account may be used for purposes other than personal housing. THE CREDIT PHASE As its name indicates, the housing savings account allows access to financing for the realisation of a real estate acquisition (or transformation work). Thanks to the savings, a capital will have been built up over time, which will support your real estate project. These savings can be used as a basis for a global loan or combined with a mortgage loan. More specifically, saving for a home will allow you to borrow an amount identical to the capital saved. And above all, you will benefit from advantageous conditions, in particular a low and fixed interest rate for your loan. The loan application is made with your bank adviser. Generally, the financing is done through a combination of a personal contribution, home savings and a real estate loan. According to your situation and your real estate project, they will propose the best financial arrangement for you. Another advantage of home savings is the benefit, under certain conditions, of state aid. More information: www.guichet.lu Source: athome.lu SPECIAL FILE