Buy-to-let investment
The in fine loan: who it truly benefits, and why you will be refused
In fine loan: three cumulative access conditions, a higher cost than an amortising loan, and a narrow tax advantage. Check whether your application is eligible.
The in fine loan serves a specific profile: the buy-to-let investor who already has savings to pledge, a broad debt capacity and declared rental income under the actual tax regime. These three conditions are cumulative. As the capital is only repaid at maturity, interest accrues on the total amount: it costs more than an amortising loan, and outside of this profile it is refused in the vast majority of applications.
By Sandy MASCART, mandataire d'intermédiaire en opérations de banque et en services de paiement ORIAS 26000541 sous le mandat de CDV PATRIMOINE & ASSURANCE (ORIAS 14005573)
Key points
- The in fine loan never reduces the capital during its term: interest accrues on the total amount until maturity.
- Access requires three cumulative conditions: a pledged asset, sufficient debt capacity, and rental taxation under the actual regime.
- The annual percentage rate of the credit does not include the payments on the pledged contract: the actual burden exceeds what it shows.
- Under the micro-foncier regime, no expense is deductible: the tax advantage of the structure disappears entirely.
- On a principal residence, interest is not deductible from any income: the structure loses its only real advantage there.
The in fine loan serves a specific profile: the investor who has savings to pledge, a substantial borrowing capacity, and rental income assessed on an actual basis. It is one aspect of financing rental property. The investment backing it is a separate matter: who to approach.
In fine loan: what you pay, and when
Each month, you pay the interest and the insurance; the entire capital is due at maturity. At equal interest rates and terms, it costs significantly more than an amortising loan.
The lender requires an exit capital constituted in advance and pledged in its favour: a life insurance policy, a capitalisation contract, or securities, funded initially and then monthly. You therefore bear two costs: the interest and the savings.
Comparing two loan offers without being misled by the monthly payment
The in fine monthly payment appears low: it contains no capital. Compare using the APR, never the monthly payment.
Calcul actuariel par méthode d'équivalence, intérêts composés
Ce calcul tient compte de la date de chaque versement. C'est ce qui lui permet de comparer deux échéanciers de formes différentes — et ce qui interdit d'annualiser un taux mensuel en le multipliant par douze.
- En vigueur depuis le
- Source
- Article R. 314-3 du code de la consommation — Légifrance
This rate does not include the contributions to the pledged contract: your actual financial effort is heavier.
The three access conditions, without exception
Two out of three are not sufficient.
1. A pledged asset, existing or constituted at the outset
A pledged investment vehicle, an initial contribution, a contribution plan. The pledge is added to the security over the property: surety or mortgage. The contract remains locked until maturity, and its return is promised by no one.
2. A debt-to-income ratio that absorbs both charges
The structure does not rescue a tight application.
Critère d'octroi imposé aux établissements de crédit par le Haut Conseil de stabilité financière. La décision précise que ces critères s'appliquent « outre leurs critères propres » : ils s'ajoutent à la politique de chaque banque, ils ne s'y substituent pas.
- En vigueur depuis le
- Source
- Décision D-HCSF-2021-7, art. 1er — Légifrance
The lender counts the interest and the contractualised savings: the debt-to-income ratio, the rental income.
La maturité est la somme de la période de différé et de la période d'amortissement. Un prêt in fine consomme cette durée sans amortir : à l'échéance, le capital dû est celui du premier jour.
- En vigueur depuis le
- Source
- Décision D-HCSF-2021-7, art. 1er — Légifrance
3. High property tax, declared under the actual regime
Au régime réel, les primes d’assurance figurent parmi les charges de la propriété déductibles pour la détermination du revenu net foncier (CGI, art. 31, I, 1°, a bis). Le même article range les intérêts des dettes contractées pour l’acquisition du bien parmi ces charges (d).
Le texte cité range les primes d'assurance et les intérêts des dettes contractées pour l'acquisition parmi les charges déductibles. Il ne nomme pas l'assurance emprunteur en particulier : ce rattachement relève de la doctrine administrative, qui n'est pas citée ici.
- En vigueur depuis le
- Source
- Article 31 du code général des impôts — Légifrance
The interest remains deductible to the maximum until maturity. Three limits:
- The micro regime deducts nothing.
- The interest deficit is offset only against property income (Article 156 of the General Tax Code), not against salary.
- You recover a fraction of the interest, according to your marginal tax rate.
The only in fine loan that almost everyone obtains
The bridge loan, settled by the sale of your property: how it works.
In fine or amortising: the comparison in eight lines
| Criterion | Amortising loan | In fine loan |
|---|---|---|
| What you pay each month | Capital and interest | Interest only, plus the savings effort alongside |
| Evolution of the interest burden | Decreasing | Constant |
| Outstanding capital over time | Decreasing | Unchanged until maturity |
| The lender's security | Improves over time | Depends on a financial asset |
| Deductible burden under the real regime | Decreasing | Constant |
| Total cost, at equal rate and term | Lower | Higher |
| Actual cash-flow effort | A single line | Two lines, one of which is outside the APR |
| Population who obtains it | All financeable files | A niche, processed outside the branch |
And for a primary residence?
No interest: the interest is not deductible from anything. A deferred amortisation on a standard loan is more suitable.
Why does the lender most often refuse an in fine loan?
Its security depends on a financial asset at a distant date. It wants a pledge that covers the capital amply from the first day.
- The pledged asset is insufficient, or does not reconstitute the capital.
- The debt-to-income ratio does not pass, savings included.
- The counter is not authorised to process a pledge.
Two other ways to keep deductible interest
- A long amortising loan, with a possible deferral.
- A company subject to corporation tax, where the amortisation of the property counts more: the SCI under income tax or corporation tax.
Several properties already? Financing a further investment.
Are you within the target scope?
Three 'no's close the matter:
- Income from property taxed on actual income?
- Other income from property than this asset?
- An assignable contract, locked until maturity?
- Savings and interest included in your debt-to-income ratio?
- A let property, not your main residence?
- A quantified exit, even if the contract is insufficient?
Four questions to ask before the assessment
- What proportion of the assignment, on what yield? In writing.
- What if the contract depreciates? Look for the guarantee call clause: read the loan offer line by line.
- Does the insurance cover the initial capital? The insurance of a rental investment.
- And in the case of an early sale? The entire capital is due.
Without a quantification of the total cost and of the savings, it is a brochure. Do you have your rental project in mind? Create your file or have the three conditions checked by telephone.
Sources
Read next
- How much can I borrow? Mortgage capacity in Lyon
- Financing a bare ownership purchase: the loan for a property that generates no income Bare ownership on credit: no rental income against the loan. Term aligned with the usufruct, security, charges, taxation, exit: what the bank checks.
- SCPI financing: what the lender checks before funding units Few lenders finance SCPI units. Loan regime, income considered, security, fees, liquidity: what they verify and how to prepare.
- Financing a fourth rental investment: why the bank stops, and how to proceed Refusal at the third or fourth rental investment: what is truly blocking the bank, and the levers that restart the financing, in the right order.
- Mortgage insurance for a rental investment: which coverages to reduce and which to keep For rental properties: the cover the lender really requires, what can be reduced, the cumulative-limit trap, and the case of a property company (SCI).
All articles on this topic: Buy-to-let investment