Assets Question: real estate financing is a puzzle game

The key point in the financing of rented apartments is the difference between credit and investment interest. Because this should be large enough to compensate for the loss, obtained by the taxation of interest received.

The suspension of repayment no longer plays a role in the financing of the rented property. Ten years ago, when there was endowment insurance with tax-free maturity payments, it belonged for top earners trigger to include a fixed-rate loan instead of an annuity loan and deposit repayments in insurance. Since the taxation of policies, such financing has disappeared from the scene. Equally models with fund policies and mutual funds ended up in the dustbin.

The policies half of subject interest rates of personal taxation and the equity savings plans are charged with the flat tax. This has carry trades – here the loan with the deductible interest on the debt, there the deposits with the tax credit interest – lost much of its appeal. But who expects by the loans, find interesting ways to reduce the tax burden on the current interest rates.

Equity is used without detours

An entrepreneur wants to build a property for 3 million euros. Of own resources are present, 1 million euros so that foreign funds are to be included more than 2 million euros. The bank proposes to thirds funding. The first million is covered by equity. For the second million, a classic annuity is provided which costs 4 percent annually and is amortized over 15 years. In the third million, a fixed-rate loan and a savings agreement are used. The fixed-rate loan costs annually 3.5 percent and runs seven and a half years. During this time, the savings agreement is replenished. After the allocation of building a society, the loan is repaid so that even this block will have been repaid after 15 years.

The proposal is solid home cooking. Equity is used without detour. The mortgage bank costs 4 percent per year. The interest rate is fixed 15 years. Thus falling rates of 180 à 7397 euros. In the solid loan interest of 3.5 percent per year to be paid. The 90 payments à 2917 euros. In the same period, 90 installments of EUR 5500 shall be paid to the building society. As a result, falling for the building society loan, which costs 3.75 percent a year, another 90 installments of at 6344 euros. Consequently, a cash flow comes out at the bottom line, which consists of two parts. In the first half, 90 installments are payable à 15 814 euros, and in the second half, there are 90 installments of 13,741 Euros. edged the 180 payments from the starting amount which is 2 million euros, and the remaining debt, which is at zero euros. This results in an effective interest rate of 4.22 percent before taxes. Are the tax benefits arising from the deduction of interest on the debt, built into the financing, the costs drop to 2.33 percent after taxes.

With a lot of courage can save a whole lot

The problem is the savings agreement. If the entrepreneur both the first and the second million fund in the same way, it could save around 5,000 euros. This is with a credit of 2 million euros, not much, but the savings agreement brings the entrepreneur no advantage. After seven and a half years of capital on the one hand added to 3.5 percent and the other part applied money to 1 percent. This can not go well, and the alternative of the mortgage at 4 percent is cheaper.