Debtor pays in continuously during the loan term
Taking out a repayment-free loan is basically a kind of special feature among building loans and can be advantageous for one or the other developer: during the term, the borrower only pays interest back to the lending bank; the loan itself is not repaid during the term.
The loan amount is only repaid at the end of the term, in an ad hoc payment. In practice, it is therefore often necessary to take out capital-forming life insurance in parallel with the financing and into which the debtor pays in continuously during the loan term – if the loan contract expires, the life insurance should also be paid out.
The interest on the borrowed loan remains constant throughout the entire term – this is why such financing methods have made sense in the past for landlords in particular, since they were able to claim the costs of the financing, which naturally includes the interest, for tax purposes. However, this tax-saving model has now lost some of its attractiveness, since life insurance income can only be collected in half tax-free.
How attractive is a repayment-free loan?
Borrowers should consider a few things before taking out such a loan, such as how high the tax losses from leasing or renting are. Then you have to check whether you have sufficient financial resources, for example from your income, to be able to offset the tax losses. Caution: German tax law provides that only a limited amount of losses that result from one type of income are offset against profits from other types of income.
It must therefore be checked accordingly, depending on which income is affected, to what extent there are limits to the loss statement to be made, which result from the German tax law
It is not absolutely necessary for life insurance to be taken out – however, other collateral must then be available to a sufficient extent. Even though the attractiveness of the repayment-free loan for rented properties has decreased, it is still interesting and can be included in the real estate financing, ideally after the tax adviser’s opinion.