Even though borrowing rates have increased significantly in recent months and could reach 4% over 25 years by the end of the summer, investing in real estate is still a good idea. Here's why in five reasons.
1 Borrowing is saving
When you take out a home loan, the monthly loan payment is made up of a capital part and an interest part. In the event of resale, the borrower will recover the capital share that he has repaid. Borrowing is therefore saving without realizing it.
While by remaining a tenant, the rents he has paid will be lost...
2 Control your housing budget
Reimbursement of monthly loan payments is no surprise. While rents can be revised each year on the basis of the reference rent index (IRL), even if the increase is limited to 3.5% in mainland France until March 31, 2024, monthly loan payments remain the same every month. Borrowing, even at 4%, allows you to better control your housing budget and avoid increases in rental charges.
Furthermore, in times of high inflation, we borrow at negative real rates, as currently when credit rates are lower than the level of inflation. If the borrower's salary increases, the weight of the fixed monthly payment of his loan will then decrease in his overall budget, as will his debt ratio.
3 Renegotiating your loan is always possible
After historic declines, credit rates have continued to rise since 2022. But nothing prevents them from falling again in the years to come, once inflation is under control. If this is the case, the borrower can always renegotiate the conditions of his loan contract with his bank or compete. The key is savings on the amount of its reimbursements.
4 Enjoy life
Housing is often the main cost to be taken on each month, whether you are a tenant or an owner. But unlike a tenant, an owner will erase this charge at the end of the loan. If his debt capacity allows him, he can also make a rental investment to generate additional income.
In the longer term, this real estate will also make it possible to compensate for the drop in income caused by his retirement.
5 Building up old-age insurance
Being an owner also allows you to have capital that can be used to improve your end of life. Indeed, the value of the real estate heritage can be used to finance its aging well, by selling the home in order to free up cash or through, for example, a mortgage life loan in order to obtain a sum of money to develop its well, finance home help or a retirement home.
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