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Finance simulation

Simulation of an housing loan to acquire a real estate property under the freehold leaseback scheme.

Example: someone gets a monthly income of Eur. 5,000 (ie. Eur. 60,000 yearly). He has no debts. His available cash is Eur. 50,000.

His objectives:

-        Either to prepare his retirement

-        Or to increase his personal assets without too much financial burden

-        Or both…

Over a 15 year reimbursement period, with a repayable housing loan at 3% interest rate, the borrower can acquire a property worth Eur. 246,743. The housing loan amount will be Eur. 204,755. Monthly loan repayments will be Eur. 1,500.

Meanwhile, he will receive a guaranteed rental income of 4% on his real estate investment, ie  Eur. 822.47 /month (ie. 246,743 x 4% /12).

Summary:

-        Acquisition amount: Eur. 246,743

-        Repayable housing loan: Eur. 204,755 (at 3% interest rate)

-        Available cash: Eur. 50,000

-        Monthly loan repayment: Eur. 1,500

-        Monthly rental income: Eur. 822.47 at 4% interest rate)

-        Net monthly outflow: Eur. 677.53 ( ie. 1,500 – 822.47)

-        Total paid amount:  Eur. 121,955 ( ie. 677.53 x 180) for an acquisition value of Eur.

         246,743

-        Moreover, the rental amount is indexed while the loan repayments are fixed, therefore the

         monthly outflow decreases every year.

-        Notary fees for the acquisition of a newly built property in France is about 3%.

-        At maturity of the housing loan, the investor can keep his property and cash the rental

         income, uses his property for himself or sell it.

-        Bank can lend up to 85% of acquisition cost (repayable housing loan) or 75% of acquisition

         cost (bullet loan).

-        If a Belgian based resident wishes to acquire a property in France, bank will take a charge

         (mortgage, hypotheque) on the French property and not on a Belgian real estate asset.