Interest subsidies are granted to government employees—i.e., employees who have either general civil servant status, or are covered by the government employee scheme, or by the collective agreement applicable to government workers, who are employed by government administrations and services or by a public institutions—who have taken out a housing loan under certain conditions and according to specific terms.
The interest subsidy is a form of interest aid, provided by the state, that may be granted to reduce the costs incurred when repaying a mortgage taken out for the construction, purchase or transformation of a dwelling used as a primary, permanent residence.
Who is concerned
The subsidy is granted to employed active government employees with at least one year of service as of 1 January of the year for which the subsidy is requested. The subsidy can be granted during a total period of 15 years at most. If 2 spouses or partners are government employees, the above condition must be met by one of the spouses/partners.
Only one interest subsidy is granted per family or household.
A household is considered to be 2 people living together as a couple, regardless of the legal form of this arrangement.
However, if the employee receives this benefit at the moment of their retirement, they will continue to be eligible for the benefit for as long as they have at least one dependant child as of 1 January of the current year.
A borrower who wishes to receive an interest subsidy must have taken out a mortgage with a banking institution which has been approved in the European Union (EU) and in the European Economic Area (EEA) by no later than 1 January of the year for which they are requesting the subsidy for the purpose of:
an owner-occupied dwelling located in the Grand-Duchy of Luxembourg.
"Owner-occupied dwelling" means the only real property that the employee/couple possesses (or will possess), and which is (or will be) effectively and permanently occupied by the employee/couple.
The employee and their spouse/partner must not be the owner, co-owner or rightful user (usufructuary) of a building located in the Grand Duchy or abroad on 1 January of the year of the application.
How to proceed
Submission and processing of the application
The subsidy application must be filed before 1 July, using a special form, with the Ministry of the Civil Service (ministère de la Fonction publique) (Service for Interest Subsidies), which will establish the application file.
Requests for interest subsidy forms should be made at the beginning of the year, by telephone or email, specifying the applicant's national identification number.
If the application is returned for the current year, another application is automatically sent in April of the following year.
If the application is not returned, the file remains on standby until the 15 years have elapsed.
The subsidy is granted for the term of the loan(s) taken out for a given dwelling, and may not exceed a maximum of 15 years.
For the purposes of granting the interest subsidy and applying the amortisation schedule, only those years for which the subsidy was requested and granted are considered. The first application may be made the year following that in which all or part of the loaned amount was made available to the beneficiaries. In the event of several loans for a single dwelling, the same amortisation schedule will apply to all of the loans.
In the dwelling is being built or transformed, it must be occupied or reoccupied within a period of 2 years as of 1 January of the year following that in which the first application was filed. The Minister for the Civil Service may grant an exemption.
In the event of the sale of a dwelling for which an interest subsidy was obtained, and the purchase of a new dwelling, or in the event that a household is dissolved, the amortisation plan continues to apply. In the latter case, each of the former partners can continue to receive the subsidy during the remaining term provided for in the amortisation plan, as long as they meet all of the required conditions.
The employee must provide all information and details to confirm they fulfil all of the conditions for the granting of the subsidy. In the event of false statements, inaccurate information, an administrative error or a failure to comply with the 2-year occupancy period, the beneficiary may be required to reimburse the subsidy.
Amount of interest subsidy
To calculate the subsidy, the family status and balance of the home loan(s) on 1 January of the year for which the subsidy is requested are considered.
The amount of the interest subsidy is calculated with a cap of EUR 150,000, with a 15-year amortisation schedule. For an employee or household without any dependent children, the subsidy is 0.50 %, calculated on the balance of the loan, multiplied by the rate specified in the amortisation schedule. It is increased by 0.50 % for each dependant child.
A dependant child is a child for whom the applicant, the spouse or partner receives family benefits, or a child up to the age of 27 who is covered by the applicant's, the spouse's or partner's health insurance, who lives with the applicant in the dwelling and who has been declared as living there.
For beneficiaries of an effective interest rate below the 2 % reference rate, the calculated subsidy is decreased by the difference between this reference rate and the effective rate of the loan(s) taken out.
No subsidy is allocated if the total amount calculated is less than EUR 25.