Loan in fine: a mortgage to repay on maturity

What is a loan in fine and its advantages?

The loan in fine is a very specific type of loan. Unlike the conventional depreciable credit, generally used in the financing of a property, the credit in fine allows to repay the principal only at maturity of the contract. Capital is therefore not amortized over the years, and the borrower pays monthly payments consisting solely of interest. How exactly does this loan ultimately work, and what are its benefits?

Operation of the loan in fine

The vast majority of loans work the same way: you borrow a sum of money that you repay at regular intervals until the balance, each monthly payment including a portion of the amount due and a percentage of interest. But the loan in fine, it is different in that it offers the borrower to pay the entire capital due at the end of the contract.

In the meantime, what’s going on? You still have to repay monthly payments to the lending institution, except that they consist of only two things: loan interest and insurance costs. The capital, it remains intact until the maturity of the credit.

In return, however, the amount of interest increases drastically. To get an idea, a loan of 100,000 euros at a rate of 2% over 15 years will pay only 166 euros per month instead of 645 euros for a conventional credit; but because of the higher interest, it will also cost 30,000 euros instead of 16,000 euros!

Of course, ready in fine or not, it is still to pay your loan. This means that you have to put the money you do not spend for repayment on time, for example on a specially adapted savings product (usually offered by the bank concerned, which sees it as a real guarantee). You can also choose to resell the real estate that you bought to be able to clear the credit.

Why take out a credit in fine?

The main advantage of the loan in fine is the drastic reduction in the amount of your monthly payments. Because your regular repayments only include borrowing interest (for the most part), they are reduced to amounts that encroach much less on your daily budget. In addition, the amounts are constant throughout the term of the loan.

Nevertheless, the money thus earned must be saved in order to pay the outstanding balance at the end of the contract. This is another advantage of the loan in fine: you have the opportunity to invest this money on attractive savings products (Livret A, life insurance) or to invest in it, in order to obtain savings. interests. Which would not have been possible if you had paid full monthly payments from the start!

Finally, there is one last important advantage, but it concerns a specific category of borrowers: investors, who are also the first targeted by this type of credit.

A tailor-made loan for investors

Due to its specific nature, the loan in fine is not intended for all borrower profiles. First, the duration of borrowing is generally less than for conventional credit: between 3 and 15 years. Then, the borrower insurance (with a guarantee against death or disability) must cover the borrowed capital as well as the monthly payments. Finally, you should know that interest is almost doubled.

In fact, credit in fine is mainly reserved for a very particular category of borrowers: rental investors. With this system, the total amount of interest is significantly higher than that of a depreciable credit. This mechanism therefore benefits taxpayers who are heavily taxed, who can deduct their loan interest from their property income and thus realize significant tax savings.

In short, credit in fine is a type of borrowing that is infrequent but particularly interesting – provided you make a rental investment and control the tax mechanisms!