The advantages of buying with a mortgage
In this time of low interest rates, the purchase of a property with a mortgage should be favoured. This is a winning formula for purchasers of their main residence, a pied-à-terre, or a rental property.
You’ve got enough liquidity to buy a property outright? Don’t dip into your shares or at least only do so as far as is necessary to have a deposit that will enable you to unlock the best interest rates available. Today, it’s best to play the borrowing card because the cost is so low. For a lessor, it’s also the moment to take advantage of the “financial leverage” that comes with a mortgage that can be offset against, and therefore reduce, tax obligations.
Historically low interest rates
For 12 months, interest rates have continued to fall. Today, they are at historically low levels. According to a recent study from the broker Immoprêt, it is possible to get 2.1% (excluding insurance) over 15 years; 2.33% over 20 years; and 2.80% over 25 years. In these favourable conditions, the individual can borrow “cheaply”.
So called “assistance” loans also exist at equally competitive tariffs. It’s the case for the loan from Action Logement (formerly 1% Logement) that offers rates of 1.25% (excluding insurance) and a loan linked to its housing savings account at 2.25% (excluding insurance). You shouldn’t hold back on taking advantage of these complementary loans and combining them into a “free” bank loan.
Flexible term loans
Turning to a bank loan is the best solution to building yourself a real estate portfolio “in real time”. It’s even the ideal means to become a property owner without paying the total price up front. The purchaser immediately enjoys the property purchased, whether they live there, or rent it out, at the same time repaying the bank loan in instalments. The term of the mortgage serves as an adjustment tool. Allowing for comparison on-line of your monthly outgoings with your financial means and level of debt.
Interest on borrowing is deductible
For an investor, utilising a mortgage gives them the opportunity to optimise the tax implications of their property transaction. When a purchase is financed through a mortgage, the interest on that borrowing is deductible from their property earnings and/or their overall earnings. This know-how thus permits the taxpayer to reduce their taxable assets and therefore, in the end, pay less tax.