Definition and functioning
Designed specifically for investors who want to optimize the tax aspect of their operation, the loan in fine, as its name suggests Latin origin, allows to involve the return of capital until the end of the credit .
Thus, throughout the term, your monthly payment will only include interest that will be fully deducted from the rental income.
Life insurance: the ultimate backing of the loan in fine
This type of transaction is usually backed by a capitalization product. Life insurance, for example, is particularly suitable for this purpose.
The money thus placed will grow in order to eventually achieve sufficient capital to repay the debt , that is to say the loan.
In order to eliminate any risk that could unbalance the transaction, the banks require that the capital be placed without risk .
For example, if you have a multi-asset life insurance policy and you have opted for equity funds, you will first have to arbitrate to a fund in Euros.
- Learn more about the different media. Ask your insurer whether this option is free or paid.
Be aware that the bank also has the option to prohibit you to make arbitrations without his agreement and until the final refund.
Calculation with a loan backed by an investment transaction
Let’s take an example based on a real estate loan of € 100,000 over 20 years at 4%. Throughout the duration of the operation, the borrower will reimburse:
(100 000 € X 4%) / 12 is: 333 euros per month
To secure this loan, it will pledge an investment of € 55,000 which, capitalized on the basis of a yield assumption of 3%, will replenish the initial capital of € 100,000 which it will have to repay to the bank.
The final cost of credit (without taking into account tax repercussions) will therefore be:
(333 € X 240 months) + 55 000 € is: 134 920 € -100 000 € = 34 920 €
Note that in the case of a depreciable loan, the monthly payments would have been 608 € and the overall cost of 45 435 €.
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Please note : our example does not take into account any subscription fees or term taxation, including capital gains tax and social security contributions.
Our advice : investing in life insurance policies through wealth managers often costs more than a subscription online or at a bank. It should be noted that the entrance fees are used as a basis for a portion of the remuneration of wealth managers (who are also remunerated on the outstandings) and advice is not always at the rendezvous.
Case of a loan backed by a savings transaction
Some credit agencies allow the borrower to replenish the initial capital from a savings transaction. This is particularly the case for low-cost work loans. Thus, if you have to borrow 10,000 euros for example, you can fully consider this possibility with your banker.
The loan relay
The operation of the loan in fine is also used for other types of financing such as the bridge loan, since until the sale of the property, the borrower only pays the interest, except in the case of a total franchise. .
Mortgage life loan
A special form of repayment in fine, the mortgage life loan is intended for homeowners who wish to borrow without increasing their expenses by monthly installments linked to a loan.
The borrower will thus benefit from a credit which will only be reimbursed upon his death by his heirs with the proceeds of the sale of the property taken as collateral.
Special case of the principal residence
Although not enjoying any tax benefits, some buyers opt for a loan in fine for the purchase of the principal residence. The main interest lies in the possibility of benefiting from lower monthly payments compared to a depreciable credit and to retain capital rather than using it as a personal contribution.
A more expensive borrower insurance
Pay attention to the cost of borrower insurance if you opt for this type of financing. You will inevitably pay more because you do not amortize the capital. Have your bank run a simulation and compete against an outside delegation.
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Finally, note that the rates charged by banks are generally higher for a loan in fine than for a loan depreciable. One more reason to play the competition.