Find a Mortgage to Finance a Rental Investment
March 3, 2019
Different forms of loan to invest in the rental
Loan in fine or depreciable?
the credit in fine
If the loan in fine is not suitable for the purchase of the principal residence, it offers various advantages in the context of the rental investment.
The first advantage lies in the fact that the share of interest to deduct on rental income is significantly higher than for a conventional loan, as can be seen in our example. This is logical because we do not repay the borrowed capital.
To put it simply, in our example we will start with a mortgage of 200,000 euros at a rate of 3.6% excluding insurance over a 15-year loan term, a rate of 4% for 20 years and 4.20% for a loan over 25 years.
The second advantage of such a formula for the investor is can reduce his monthly loan since it does not amortize the capital. On the other hand, it requires that you have capital to invest. On the other hand, the final cost of credit will be higher than with conventional financing.
|15 years||20 years||25 years|
|classical||In fine||classical||In fine||classical||In fine|
|Total interest deducted||59 000 €||108 000 €||€ 90,870||160,000 €||€ 123,365||210 000 €|
Most investors opt for a depreciable credit.
In this case, it is necessary to make a numerical projection of its project, because the share of interest will decrease as and when repayments. As a result, the tax deduction will be less attractive in recent years.
Choose between a fixed rate and a variable rate
Banks often offer a variable loan to finance a rental investment.
If you opt for this type of financing, it is better to choose a revisable rate “secure”.
For example, you can decide for a cap rate that puts a cap on the rise or choose a variable term loan. In the latter case, the eventual increase in the rate will primarily affect the duration and not the monthly payment.
Loan in the context of a tax exemption operation
If you make a rental investment in the context of a tax exemption operation such as the Borloo law or the Scellier law, you must first carry out a complete tax study.
Be vigilant and seek to obtain from another source of the one who offers you the operation. Some unscrupulous wealth managers do not hesitate to offer summary studies, without taking into account inflation for example to obtain a favorable result for the investor.