Rental real estate offers many advantages over most financial investments. It's a liquid, accessible, and profitable investment. Whether it is to diversify your real estate assets, tax exemption, or prepare for your retirement, you should invest in stone. Let's see how to properly finance a rental investment.
Personal contribution or mortgage: find the right combination!
The time has come to finance your real estate investment! In general, you have two options: invest in real estate with your own funds or take out a mortgage. Each option has advantages and disadvantages. The ideal would be to find the best combination to optimize the financing of your investment.
Determine your personal contribution
Although you can buy a real estate property entirely with your own funds, it is always advisable to take out a loan. On the one hand you will easily build wealth and become a homeowner through leverage. On the other hand, you will be able to reduce your property tax by deducting the interest on the loan from your rental income.
Amortising loan
The amortizing loan is the most used way to finance the acquisition of a real estate property. It is particularly suitable for the financing of a main home and is characterized by a repayment term of up to 30 years. The repayment of the depreciable loan is done according to a depreciation schedule defined according to the chosen periodicity (monthly, quarterly ...).
Bullet loan
Unlike the amortizing credit, the monthly payments of the In bullet loan include only the interest on the loan and possibly the insurance costs. They are fixed at the signing of the contract and do not vary during the entire duration of the loan. As for the capital, it is repaid in one go at the end of the loan.
Tips for optimizing your home loan
There are several tips to lower the costs of a home loan to further optimize your rental investment:
Make the most of the competition between credit institutions
To find the best mortgage offer, you have to negotiate with several credit institutions. Start by comparing loan offers-online-through a credit comparator. Then select a few credit institutions and make appointments with their client advisors.
Negotiate the fees
When you ask a bank to apply for a home loan, you must-in most cases-pay a fee. These fees are a kind of remuneration for the staff of the bank that intervened on your loan application. Most banks require payment of these fees as they represent an immediate source of profit.
Choosing credit insurance
Although credit insurance is not legally required, almost all financial institutions require it for loan applicants. Indeed, it makes it possible to cover these lending organizations against possible risks of death, illness, disability, or loss of employment. Thus, the insurance guarantees the payment of monthly repayments even in the event of serious disaster of the borrower.
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