The repayment-free loan is mainly used for real estate financing, but is also conceivable as an acquisition loan. The term “repayment-free” means the fact that the borrower pays only the interest incurred during the term of the loan agreement. The reason for this is the higher tax base for the interest on the repayment-free loan. For the final repayment, a life insurance policy can be taken out, which will be paid out after the end of the loan period. If a bullet loan is chosen, it only pays the accrued interest until the end of its term, but the actual amount will only be fully paid out by the agreed maturity date.
A repayment-free loan?
That’s easy: A loan whose residual debt you do not pay during the contract. Rather, the entire monthly installment of a repayment-free loan is fully spent on interest. You only pay the remaining debt at the very end when the loan expires. The repayment-free loan is therefore often referred to as the bullet loan or the bullet loan.
Now you can ask yourself which banks are doing this and why do you need a loan without repayment? A repayment-free financing can, for example, be used as transitional financing. They have their own house in Munich, but they want to go home. In most cases, acquisitions and dispositions can not be completed in parallel, so that the price of the new property is already required before the proceeds from the sale of the old building are available.
Frequently in such cases loans are offered by the banks. However, there are other applications for repayment-free loans:
Contact our mortgage specialists, they will be happy to help.
Repayment-free loan (maturity)
A repayment-free bond, also called bullet loan or “bullet loan” or “bullet loan”, is characterized by the fact that during the term only interest and no repayment has to be made. Repayment-free loans are used, for example, if own funds are preferred for a limited and defined time. An example would be an existing life insurance policy, which will be paid out in 5 years, but whose repurchase value should be available for refinancing.
This has the advantage for the client that only the interest payments are incurred and thus the monthly costs are lower. The repayment amount is underpinned by the maturity payment of the life insurance policy. In addition, repayment-free loans are used primarily if the borrower can take into account the interest-related expenses for tax purposes. The interest burden over the entire term of the loan is relatively high due to a lack of repayments and entails considerable tax savings.
Examples are the financing of rental properties or the financing of photovoltaic systems. In contrast, the borrower usually saves so-called substitute repayments separately, eg in the form of a death insurance or a special fund, from which the final loan is repaid on maturity. A clear competitive disadvantage is once again the persistently high interest burden, which in the case of tax creditability is to be regarded as advantageous if the interest payments can not be claimed for tax purposes.
By waiving repayments, the interest rate over the entire term is much greater than when financing with partial installments. This form of financing is therefore generally unfavorable to the borrower, especially in the case of purely private forms of financing (non-leased land or other high-yield properties). Exempted from this is, for example, the immediate financing of Bauspar funds, for the repayment-free loans are granted in the austerity phase, as the builder in these financing operations government grants (eg Wohn-Riester) forgives and at the same time a constant monthly burden over the financing period can be achieved.
As a rule, traditional mortgage loans are usually made as annuity loans …. Repayment suspension Insurance in the form of life insurance and bullet loan There are different ways to pay for the construction or purchase of a property. Repayment lock against repayment Surrogate Borrowers who conclude a loan agreement with their principal bank can choose the repayment method themselves under certain conditions.
Capital repayment In connection with the maturity or repayment-free loans, it is economically reasonable and is usually also required by the credit institutions that the borrower ….