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HomeLoansIs it in our interest to settle our mortgage in a context...

Is it in our interest to settle our mortgage in a context of inflation?

Should you pay off your mortgage before maturity when you have cash? Analysts believe that borrowers may have a greater interest in holding it in a situation characterized by inflation. This option benefits them in terms of taxation and savings. By comparison, the benefits of prepayment turn out to be minimal.

It is still possible to earn a substantial income even when the economic situation is difficult. It is still possible to receive an inheritance, the fruit of a property sale, a donation, etc. In situations like these, one of the first projects that many people think of is paying off all their debts. Paying off a home loan is usually at the top of the list.

However, according to experts, this is not necessarily the best path to choose in a period of inflation. Maintaining a mortgage loan can provide a tax advantage.

What price for your project?

The best solution is to keep the credit

Keeping a home loan can especially contribute to evading wealth tax. This tax rate is also observed when the credit is granted for the purchase of a home that is intended to be rented out. The co-founder of the company Net Investissement, which specializes in this investment, Stéphane Van Huffel, explains:

The interest on the loan linked to this type of property is fully deductible in capital income. By removing this credit while retaining the rental property, the taxpayer is exposed to increased taxation.

Stephane Van Huffel

In addition, one prepayment of home loan seems theoretically to be an advantage because it would reduce the total cost of the loan, all the more so if the borrower had the prepayment penalty deleted. Nevertheless, outstanding loans have benefited from the very low interest rates of recent years. The Director of Wealth Management at Cyrus Conseil, Didier Mahieu, supports:

You should never deprive yourself of the leverage of credit in a context where interest rates are still cheap, even if they are rising.

Didier Mahieu

What price for your project?

It all depends on the household debt ratio.

Keeping a home loan allows that in addition to make forced savings and acquire real estate assets in the long term. In addition, the use of monthly payments changes the longer time passes. Ultimately, they are used to pay the principal instead of interest. Besides, insurance in case of insolvency or death must be considered. It protects a spouse in a current loan: the outstanding capital will be paid by the insurance company.

Finally, experts point out thatearly repayment would be a false good idea especially if the debt ratio:

  • Does not rise too high;
  • Remains tolerable for household cash flow.

This is what a partner at Version Patrimoine, Yves Mazin, advises if you can keep your loan, you should keep it.

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