Interest relief is a payment towards interest from the State which may be granted to reduce the monthly interest incurred by people who have taken out a mortgage with a view to building, buying or bettering their home. Interest relief is calculated in such a way as to reduce the debit interest rate by 0.50 % per dependent child. Under no circumstances may it exceed the effective lending rate or the capped rate of 3 %.

The interest relief may be combined with similar benefits resulting from other legal and regulatory provisions and with the interest subsidy, but cannot exceed the effective lending rate or the capped rate of 3 %. With regard to interest subsidies, benefits for children are applied through the interest relief.

 

The eTracking function for hardcopy (paper) forms is a feature of this process. This feature enables users to stay informed about the advancement of their applications by email and/or by SMS.

Who is concerned

Interest relief is available to any person who is legally authorised to reside in Luxembourg, is domiciled there and actually residing there, and who has taken out a mortgage to acquire, build or improve an existing residence located in Luxembourg, serving as the permanent main residence of that person and their spouse/partner and their forebears, descendants and those of their spouse/partner living in the same household.

Prerequisites

Applicants wishing to receive interest relief must:

• be authorised to legally reside in Luxembourg, be domiciled there and actually live there;
• live in the residence for which the interest relief is being applied for;
• have taken out a mortgage with an approved credit establishment in the European Union and European Economic Area, or a social-security-based pension organisation, to buy, build or improve an existing residence located in Luxembourg that will serve as the actual and permanent residence for the applicant's household;
• not be the owner, commonholder or legally entitled user (usufructuary) of another dwelling, whether in Luxembourg or abroad;
• have at least one dependent child (receiving family benefits or co-registered on the applicant's health insurance and living in the same household);
• produce a certificate of the duly recorded mortgage document, on first request;
• be the unique holder of the loan;
• provide proof that they are the owner of the residence;
• prove that in the case of construction or improvement, that works have begun;
• provide proof that the mortgage is used. 

The applicant must be living in the property by no later than 3 years after the interest relief is granted, or the aid must be repaid.

If a dwelling is being built, it must also conform to the energy performance standards relative to residential buildings as provided for by the regulations concerning the rational use of energy.

The interest relief is not subject to any conditions of useful residential floor space.

How to proceed

Applying for interest relief

The application is made using the application form for individual housing aid, which is to be filled in by the applicant and sent to the Housing Aid Service (Service des aides au logement) before the start of the construction or improvement works, or prior to the signing of the deed documenting the purchase of the property.

Each page of the form must be signed separately.

The following documents must be submitted with the application:

• a residence permit or registration certificate or permanent residence permit (if the applicant is a national of an EU Member State, a state that is a signatory to the European Economic Area Agreement, or the Swiss Confederation);
• a residence permit or permanent residence permit for family members of an EU- or EEA Member State, or the Swiss Confederation, for the person(s) from a third country living in the applicant's dwelling;
• a dated and signed notarial deed for the property and, where applicable, for the land;
• a certificate showing the details of the loan, issued by the financial institution.

'Dependent child' should be taken to mean:

• a child for whom the applicant receives family allowances, and who lives with the applicant in the dwelling, and who is declared as living there;
• a child up to 27 years of age, who lives in the applicant's dwelling and is declared as living there, and who is covered by the applicant's health insurance, either due to their family ties with them, or pursuant to the laws of a State with which Luxembourg is linked by a bi- or multi-lateral social security instrument, or pursuant to a health insurance scheme due to an activity in an international organisation.

Income determination

The income considered for calculating the interest subsidy is the last known income at the time of the granting of the interest subsidy.

The income considered is the taxable income plus all other income—including the non-taxable income of the applicant or of any other person living with the applicant in the dwelling in question, except for descendants and forebears or family relations up to the 2^nd degree inclusive—exclusive of family allowances, State financial aid for students in higher education, allowance for severely disabled people, orphans' pensions and long-term care insurance benefits.

However, the household's taxable income must be no greater than 4 times the social minimum wage for unskilled workers.

The recipient of the aid must inform the administration, as soon as possible, of any change in their circumstances.

Criteria for calculating the interest relief

The interest relief is paid monthly or semi-annually depending on the obligations provided for in the mortgage agreement between the applicant and the lending establishment. It is calculated on the basis of the interest due based on the amortisation schedule established by the lending institution, and to reduce the debit interest rate by 0.50 % per child. In calculating interest relief, loans are taken into consideration up to the amount of EUR 175,000. This amount is amortised from the first aid payment (applications in the process of payment on 1 January 2013, can only be amortised once the file has been reviewed).

Individual files are automatically re-examined every two years. Any change in family status must be reported to the Housing Aid Service. If the data in the file justify increasing the interest relief rate, this increase will take effect from the date of re-examination.

The interest relief is granted from the date of the first application. However, a period of 6 months prior to the application may be taken into consideration if the granting conditions were satisfied during that period.

Interest relief may be granted only once per household. A second round of relief may be awarded to the same household only if the first has been repaid in full.

Whether because of divorce, separation or any other cause, the Minister can, on receipt of a substantiated request to do so, award the beneficiary remaining in the residence a provisional continuation of interest relief for a maximum duration of 2 years. The beneficiary continuing to live in the dwelling after that 2-year period and having assumed the mortgage alone may file a request to have the interest subsidy maintained; in that case, the applicant must have full and exclusive ownership of the dwelling.

The recipient of the aid must inform the administration, as soon as possible, of any change in their circumstances.

Any financial aid unduly received must be backdated and repaid.

Refusal of interest relief

Interest relief is no longer payable if the applicant or their spouse/partner:

• becomes the owner, co-owner or legally entitled user of another dwelling, either in Luxembourg or abroad;
• no longer has any dependent children;
• no longer lives in the dwelling for which the relief is paid;
• rents all or part of the dwelling in question, unless part of the dwelling is rented to a student enrolled in a post-secondary school in Luxembourg;
• has fully repaid the mortgage in question.

'Dependent child' is taken to mean:

• a child for whom the applicant receives family allowances, and who lives with the applicant in the dwelling, and who is declared as living there;
• a child up to 27 years of age, who lives with the applicant in the dwelling and is declared as living there, and who is covered by the applicant's health insurance, either due to their family ties with them, or pursuant to the laws of a State with which Luxembourg is linked by a bi- or multi-lateral social security instrument, or pursuant to a health insurance scheme due to an activity in an international organisation.

No interest relief is due if the amount of such relief would be less than EUR 25 per year.

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