If generally, the interest and a part of the capital are to be paid at the end of every month, in the case of a loan in fine, the investor pays only the interest monthly and the capital at the end of the maturity of the loan only. Although it is suitable for rental investment and sometimes in the acquisition of a second home, borrowers are hesitant. Indeed, it can not satisfy all investors.
The principle of the loan in fine is simple: the capital is to be paid in one go at the end of the term of the loan. Interest is calculated on the amount of the original loan and paid monthly, quarterly or annually. It should be known that in the case of a repayable loan the borrower repays, during each monthly installment, a part of the capital and interest on the remaining capital that he owes to the lender. As a result, the more the capital is repaid, the lower the interest. What is not the case of the loan in fine, at this level, it is therefore more expensive. Even more, if its duration is long.
As part of a real estate investment, banks usually provide a loan in fine provided that the borrower is a savings in parallel. This is used to settle the capital at the end of the loan. It is done by paying monthly a certain amount on an investment product associated with the loan. This product can be a life insurance, a home savings plan (PEL) or a capitalization bond, etc. The money placed is subsequently pledged for the benefit of the bank, which constitutes for it a guarantee of repayment of the capital. The bank may also require from the borrower an additional guarantee such as the subscription to a disability-death insurance.
The loan in fine is particularly suitable for private property investors or managers of companies that acquire commercial walls, which will receive rental income, especially if they are tax-free. Interest on an in-depth loan makes it possible to reduce the property tax base significantly, since it constitutes a deductible expense. Thus, the higher the interest rate, the less the borrower will pay taxes.
Borrowers with large capital can also take out a loan in fine. Since indeed they have enough money to settle the loan at one time. This allows them to avoid a situation of over-indebtedness and to place the equivalent of monthly payments.
The subscription to a credit in fine is done over a period ranging between 1 to 15 years. The duration in addition to being decisive on the date of repayment of the capital, is also on the interest rate.
The credit in fine is granted without a maximum amount.
The first advantage of credit in fine is the possibility of rapid return that it offers provided that the property purchased through it is rented. This constitutes additional insurance for the repayment of interest.
In addition, people with a high tax rate (over 40%) have everything to gain by subscribing because the interest is deductible from property taxes. Without forgetting that before such a loan comes to an end, the value of the property acquired is nil. It can not be taken into account for the ISF until the capital will be paid.
Subscription to death insurance is also a definite advantage. On the one hand, its cost covers the monthly payments and the borrowed capital. On the other hand, it is beneficial to the borrower’s heirs. Among other things, disability-death insurance will reimburse the bank and allow the heirs to take advantage of real estate property paid in full. Not to mention a life insurance benefiting from the regime of transmission out of succession.
The loan in fine is a credit solution more expensive than the depreciable loan and although it has many advantages, it can not suit everyone. So, before committing, it’s best to go to a wealth management specialist or broker to find the best financing solution.
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