Reserved for well-defined rental investor profiles, the loan in fine has a real tax advantage. If the interest is higher than a depreciable credit, it is tax deductible. A tax exemption likely to generate significant savings, with a well-structured financial package.
Who is the loan for?
For property investment purposes only (and not for the purchase of a principal residence), the loan in fine can be interesting by the set of tax deductions allowed by this credit, for:
- Individuals, whose tax rate is in the 30/40% range, with strong property income and good financial capital.
- SCI type companies.
What are its advantages and limitations?
In the case of an in-kind loan, repayment installments are built solely with interest , which has two immediate advantages: the amount is identical from the beginning to the end of the loan and remains lower than that of a depreciable credit, since it does not integrate capital.
A capital that is due only at the end of the loan: to do so, the borrower contracts most of the time a life insurance, which will be used for its repayment. Note that the bank will require a personal contribution of at least 30% of the capital and regular income deposited on this investment.
The main disadvantage of the loan in fine lies in its rate , much higher than those observed for mortgages. However, by being high and not declining, they also allow a larger tax deduction.
In other words, it’s all about good calculations – that you can leave to the care of a real estate broker …
What is the saving in taxes?
If your borrower profile corresponds to the credit in fine, it is possible to save a lot of money, compared to a depreciable loan . As this example shows:
- The profile of the investor: a home with 3 tax units, an annual net income excluding real estate of € 45,000, adjusted each year by 2%. This is the first rental investment made by the household.
- The property is bought € 200,000, with a loan over 15 years and rent of € 800 per month (without charges), revalued by 1.5% each year.
By choosing a loan in fine, the borrower obtains a rate of 2.50%, with monthly payments of 416.67 €. At the same time, he receives € 800 of rent and € 466.81 from his life insurance (3%), which already receives the € 60,000 personal contribution required by the bank. This is a monthly effort of € 83.48 for a property balance sheet of € 277,834.
With a repayable loan, the loan is only € 140,000 (taking into account € 60,000 contribution), with an APR of € 2.05, or € 904.14 monthly monthly payment. At the same time, the borrower receives the rent of € 800, which requires a financial effort of € 104.14 per month, for a total of € 296,236 after 15 years.
Despite the higher interest rates, the loan in fine saves 18 402 € in this example – an economy combined with tax deductions and savings yield.