What is a real estate amortisation?

In real estate, amortisation simply refers to the the reimbursement of part of the mortgage loan, more precisely the 2nd rank, over a maximal time period of 15 years or, at the latest, before the legal age of retirement.

Be careful: if you want to opt for the pledging of your pillar 2, your 2nd rank might not be equal to 15% but 25% instead which will, in any case, have to be reimbursed on the same terms.

These two types of amortisation are called direct and indirect amortisation. 

What is direct amortisation?

It is when we pay a certain amount each month in order to directly reimburse part of the mortgage loan. 

Since the total amount of the loan decreases, interests decrease as well, year after year. Because everything we pay as mortgage loan is deductible, we will gradually lose this advantage. What is more, a high debt implies a lower taxable income. The more you reimburse the loan, the more your fortune will increase and thereby, so will your taxes

Avantage : interests decrease. 

Disadvantage: taxes increase. 

Graph showing how the second row is impacted by direct amortisation in a real estate purchase

What is indirect amortisation?

It is when you pay the same amount throughout the amortisation time period. But instead of directly giving this money to the bank, you keep it safely on a pillar 3A account, either at the bank, or at an insurance, or else, on a 3B account in case the maximal amount for 3A account has been exceeded. 

Why would you do this? Simply to make sure your debt remains high in order to continue enjoying a significant tax optimization. 

And what happens to this account after 15 years? It is closed, the sum is transferred to your bank and the debt is downgraded to the 1st rank.

Avantage : multilevel tax deduction (reduction in income and wealth taxes, as well as the tax advantage related to the 3A account).

Disadvantage: rates do not decrease during the first 15 years.

Graph showing how the second row is impacted by indirect amortisation on a real estate purchase

You can simulate your purchasing capacity as well as observe the amortisation thanks to our solvency calculator!

There you go! You know everything about the two types of amortisation!