Real estate is still very popular with investors. Although the fear of a euro crisis may no longer be so great, many Germans can still enjoy the idea of acquiring apartments or even houses in order to subsequently rent them out.
However, the savings are not always enough to lift the acquisition. In addition, the interest on a real estate loan can be taxed – no wonder that comparatively many capital investment properties are at least partially financed.
Good financing is required
Such funding, however, wants to be well balanced. A central issue is the amount of the loan. The key element here is the initial repayment, which can be defined by the borrower within a specific framework. A targeted vote is advisable, as explained below.
Most banks advise their customers to choose the lowest possible repayment. Thus, the loan rate would remain manageable and at the same time it would be possible to apply the loan interest over a long period for tax purposes. In principle, these statements are actually true, but such a recommendation is not groundless. The banks also benefit because they can calculate their interest over a long period of time and thus earn well themselves.
Return is more important than the tax advantage
In terms of total return, it is beneficial to aim for a more rapid repayment. At some point, while interest may no longer accrue for tax purposes, the bottom line is that even a high tax rate leaves the investor with greater profits.
On the other hand, high repayment also carries risks. The higher the loan rate, the greater the financial threat. Just imagine, rental income will be off for a long time. While most potential investors can not imagine that, the risk still exists. Accordingly, it must be possible to use the loan rate even if the rental income fails for several months. In addition, it is always good when the rental income is sufficient to fully service the loan – so the property carries itself.
If you do not want to take a risk, you prefer a low initial repayment. In addition, the agreement of a right to special repayments offers itself. Thus, it is possible to make additional repayments and to accelerate the repayment of the loan, provided that appropriate funds are available.