Get a return on your home equity and other options
Savings do not yield any return. In fact, with the current wealth tax, inflation and low savings interest, you may even pay to park your money. That is of course not the intention. There are various ways to build up wealth.
For example, by investing in real estate. With an investment property, you buy a home and get a return from the rental income.
You can buy an investment property with tenants in it, but the property does not have to be rented out yet. You can look for tenants for your apartment yourself or parents can buy a student house for their children and rent out the other rooms.
Investing in real estate with a real estate mortgage
Perhaps you have sufficient capital to purchase an investment property completely mortgage-free. That is of course a good starting position to invest in real estate. But: there are more possibilities. If you only want or can finance a part yourself from savings, there is the possibility of a rental mortgage.
Advantages of a rental mortgage
With a mortgage specifically for rental, you can look for the most optimal balance between investment and return. In some situations, a real estate mortgage can also provide you with more benefit than purchasing a property mortgage-free from your assets. You buy one property and receive rent from it once. With a rental mortgage, for example, you have the option of buying multiple properties and receiving more rent. This way, you get more return from your own assets.
Banks require you to finance at least 10% yourself when it comes to investment properties. You can use this to your advantage. This means that you can purchase multiple properties based on that capital and in this way you can use this rule – in combination with a rental mortgage – to your advantage. This provides leverage. In addition, up to 50 percent of the property value may remain interest-only, which means that the monthly payments remain very affordable.
Example
In this example we assume:
- €300,000 savings
- a real estate property of €300,000
- €1,500 rent per month
Taxes not included
You buy 1 apartment for €300,000
from your savings €18,000 per year
€1,500 rent * 12 months
You buy 3 apartments of € 300,000
€900,000 -/- €300,000 savings
You need €600,000 in financing.
Half of €900.00 is interest-only:
€450,000 x 2.5% = €11,250 interest.
For €150,000 you can take out a linear mortgage,
for which you pay €3,750 in interest
and pays €5,000 in repayments.
€34,000 per year
and you pay off €5,000 annually
€1,500 rent * 12 months
* 3 apartments = €54,000
-/- €20,000 costs
So with the same investment you achieve almost twice as much return!
Get a return on your home's equity
Is there not (only) a question of savings, but of a surplus value on your current home? Then you can also consider taking out a mortgage loan on your own home.
With a rental mortgage you often finance between 70% and 90% of the market value of the property.
You finance the remaining part with the equity from your home. Just like the additional costs of transfer tax, notary fees, mortgage costs and appraisal costs.
The most optimal distribution of the mortgage amount and the investment from the equity depends on your personal and financial situation and the property.
Independent and tailor-made advice
A rental mortgage is a complex financial product and specialist advice is very important. Investing in a rental mortgage offers no guarantee for the future, many factors play a role, such as your future plans and further financial situation and also which object you buy, where, the tenant and rental situations etc.
Bouvy Advice specializes in customized advice that fits your situation. Make an appointment for a free orientation meeting, so that we can discuss the possibilities of a rental mortgage and investigate together how we can grow your assets.
Do you already own a property or a nice real estate portfolio? Then we would like to look with you whether refinancing can yield additional benefits.