Credit in fine is a form of fixed-rate, non-amortizable mortgage that you only repay interest and insurance for the duration of the loan. The borrowed capital remains intact until the end of the loan, and at maturity, you repay it in one go.
In order to allow a long-term repayment of the borrowed capital, the credit in fine is often associated with capitalization savings (life insurance policy), so that the savings made allow the repayment of the capital. Credit in fine is mainly a tax advantage.
Who can benefit from the loan in fine?
The credit in fine can be subscribed by a particular borrower or by a company. However, it is necessary for the borrower to have enough money at the end of the loan period to repay the loan at one time. It is therefore necessary to be able to prove the solidity of its situation in the years to come. Most of the time, the credit in fine makes it possible to facilitate the rental investment.
It is intended for rental real estate investment and is unsuitable for the purchase of a principal residence. The interest paid on this type of mortgage is deductible rental income. Credit in fine is interesting for individuals or SCI type companies receiving property income and heavily taxed.
What are the benefits of credit in fine?
The loan in fine has the following advantages:
- Lower monthly rebates
- Fructification of the savings associated with the mortgage
- In the event of the death of the borrower, the life insurance reimburses the loan, ie the heirs inherit a property fully paid
- In the event of the death of the borrower, the beneficiaries benefit from the capital of the life insurance policy (excluding inheritance tax)
- Interest deductible from rental income received as part of a rental investment. The disadvantage of a credit in fine lies in its cost, more expensive than a conventional loan due to higher interest. The value of the investment, provided that it.
What is the Pledge?
Collateral is a method that guarantees your mortgage loan with the lending bank by offering to pledge financial investments (usually life insurance type). Placement that the client may already have or may open when taking out the loan. However, the bank will not be able to force the customer to subscribe to its internal products.
Instead of taking out a mortgage or going through a bonding organization (like CL Credit), a contract between you and the bank is established stating that an amount, at least equivalent to the amount of the mortgage, is blocked during the life of the mortgage (amount that will allow the repayment of credit “in fine”, that is to say at the end of the loan, as the name suggests.If the amount pledged is less than the amount of real estate loan, a complementary guarantee will be asked to the customers like a mortgage or a deposit.
Example of IN FINE Loan
For the purchase of a rental investment of 300,000 euros over a period of 15 years at a rate of 4.20% with internal contract with the Bank.
The Bank wants clients to pledge a minimum of 30% of the borrowed capital, ie 90,000 euros.
The monthly interest will be 1050 euros and the capital will not be depreciated throughout the term of the loan, it will be refunded in full at the end of the loan.
Annual cost of interest: 12,600 euros
Cost of interest during the loan period: € 189,000 and outstanding capital of € 300,000.
The results of the calculations:
- Amount of the acquisition: 300 000 euros
- Borrower: a couple (two fiscal shares)
- Annual income: 60,000 euros
- Future Rent: 800 euros / month
- Personal contribution: 50,000 euros in amortization and 90,000 euros in fine (30% requested in pledge)
- Insurance: in DC / PTIA at 50% per head: 0.11% because 35 years old and Cadre
- Rate: 2.96% for the amortising loan and 4.20% in In Fine
|Depreciable loan||Ready In Fine|
|Amount borrowed||250,000.00 €||300,000.00 €|
|Loan monthly payments||€ 1,721.65||€ 1,050.00|
|Monthly premium life insurance||–||626.25 €|
|Rent||800,00 €||800,00 €|
|Monthly effort||876.25 €||876.25 €|
|Personal contribution||€ 50,000.00||€ 90,000.00|
|Payments on life insurance||–||€ 112,725.60|
|Amortized capital||250,000.00 €||–|
|Interest paid||€ 59,896.77||189,000.00 €|
|Cost of insurance||€ 4,125.00||€ 4,950.00|
|Total of expenses||€ 364,021.77||€ 396,675.60|
|Taxes paid in 15 years (including CSG-CRDS)||$ 152,555.68||$ 103,701.05|
|Total expenses with taxes||516 577,45 €||500 € 376.66|
Choosing the loan In Fine will save you € 16,200.80 in 15 years and customers can make a tax saving because they can deduct their loan interest.