Installment Sale in Luxembourg
The installment sale is a property sale with staggered payment over a fixed term (10 to 20 years). Unlike the life annuity, the duration is defined in advance, eliminating the uncertainty linked to life expectancy. It can be occupied (you stay) or vacant.
How Does the Installment Sale Work?
Agreement on the price
You set the total sale price with the buyer.
Fixed duration
The payment duration is defined (e.g. 15 years = 180 monthly payments).
Regular payments
Optional bouquet + fixed monthly payments until term.
Key point
If the seller dies before the end of the term, the remaining payments are made to their heirs. This is a major protection compared to the life annuity, where payments stop on death.
Installment Sale vs Life Annuity
| Criterion | Installment Sale | Life Annuity |
|---|---|---|
| Payment duration | Fixed (10-20 years) | Seller's lifetime |
| Duration uncertainty | ❌ None | ✓ Significant |
| In case of seller's death | Payments to heirs | Payments stop |
| Transmission possible | ✓ | ❌ |
| Monthly payment amount | Higher | Lower |
| Occupancy possible | ✓ | ✓ |
| Initial bouquet | ✓ (optional) | ✓ (optional) |
Example of an Occupied Installment Sale
Mrs Schmit, 72 years - Differdange
Property sold
Terms
Payments
On signing
€95,000
Monthly payment over 15 years
€2,390/month
(180 guaranteed monthly payments)
If death after 8 years
Heirs receive 7 years of monthly payments
= €200,760
Advantages of the Installment Sale
For the Seller
- ✓Guaranteed sale price (no uncertainty)
- ✓Payments transmissible to heirs
- ✓Possibility to stay in the property
- ✓Regular income over a known duration
- ✓Favourable taxation on the monthly payments
For the Buyer
- ✓Payment duration known in advance
- ✓No risk of lifelong payment
- ✓Acquisition without a bank loan
- ✓Total price defined (no surprises)
- ✓Secure investment
Frequently Asked Questions
What is the difference between an installment sale and a life annuity?
The main difference is the duration: the installment sale has a fixed term (10-20 years) while the life annuity lasts until the seller's death. Moreover, in an installment sale, if the seller dies, the remaining payments go to the heirs.
What happens if the seller dies before the end of the term?
In an installment sale, the remaining payments are owed to the seller's heirs until the end of the agreed term. This is a major protection compared to the life annuity, where payments stop immediately on death.
Can the installment sale be occupied?
Yes, like the life annuity, the installment sale can be occupied (the seller stays in the property during the term or for life) or vacant (the buyer can use the property). An occupancy discount applies.
Are installment sale monthly payments index-linked?
It depends on the contract. The parties may provide for index-linking (to inflation) or fixed monthly payments. Index-linking protects the seller against loss of purchasing power.
Installment Sale or Life Annuity?
Our experts help you choose the solution best suited to your situation and your objectives.