Bullet loan simulator: interest, cost and leverage

Simulate your interest-only loan

The simulator calculates the monthly interest payment and the total cost. Your data is neither stored nor transmitted.

Why the gross interest cost of a bullet loan is misleading

Presented at face value, a bullet loan seems to be the disadvantage: since the principal never decreases before maturity, interest is calculated on the entire amount borrowed for the entire duration. The interest cost is therefore mechanically higher than that of a standard amortizing loan, where the principal—and thus the interest base—decreases month after month. A borrower who focuses solely on this figure will mistakenly conclude that a bullet loan is more expensive.

This reasoning ignores the two key factors that make the final payment a valuable optimization tool. First, interest payments are fully deductible from rental income: the higher your marginal tax bracket, the more the government effectively covers a portion of these interest payments through property tax savings. The net cost after tax is therefore completely different from the stated gross cost.

Then, the capital you don't repay month after month remains invested—typically in a assurance-vie policy used as collateral for the loan—and continues to accrue interest throughout the term. The correct indicator is therefore never the isolated interest cost, but the overall net return of the strategy: interest paid, minus tax savings, minus the performance of the remaining invested capital. It is on this balance that the final outcome is judged.

The levers that bullet loans open up

Tax deductibility, the main driver

Interest on a bullet loan is fully deductible from your rental income. Since the monthly payment consists solely of interest—and never any principal—the deductible portion is maximized throughout the loan term, whereas with an amortizing loan, the deductible interest portion diminishes year after year. For a high-income investor with rental income to offset, this mechanism substantially reduces property taxes and radically changes the net cost of financing.

The preserved capital that continues to work

You don't repay the principal before the maturity date: it remains available and invested, most often in a assurance-vie policy used as collateral for the loan. This capital accrues interest throughout the loan term, creating a double leverage effect—you own the financed asset while maintaining a portfolio that works in parallel. This is something that no amortizing loan allows, as it consumes your monthly savings solely to pay off the debt.

Clarity regarding the final repayment

A bullet loan only makes sense if the repayment of the principal at maturity is anticipated and secured: dedicated savings, a pledged assurance-vie policy, or a planned sale. If misused—without savings for repayment, or by a borrower with low tax liability who doesn't benefit from tax deductions—it becomes a poor calculation, more expensive than a standard amortizing loan with no tax advantages. It's a strategic tool, not a loan for convenience: its implementation requires a well-structured wealth management plan.

Case study: Karim, 52 years old, rental property investor in Aix-en-Provence

Karim, who is in a high tax bracket (marginal tax rate of 41%) and already has rental income, is financing a €300,000 rental investment over 15 years at a 3.5% interest rate. He is comparing a standard amortizing loan with a bullet loan, the capital being secured against a assurance-vie policy. Here is the result of the simulator:

The gross interest cost of a bullet loan is almost double that of a amortizing loan—and that's precisely the misleading figure. Once tax deductibility is taken into account, the difference narrows; and more importantly, Karim's capital remaining invested in his pledged assurance-vie policy accrues interest for 15 years. If this capital earns more than the net interest surcharge, then the bullet loan is the better option.

Everything hinges on two conditions: the actual property tax liability must be eliminated and the repayment capital must be secured at maturity. When these conditions are met, the bullet loan maximizes leverage; when they are absent, it becomes the wrong choice. This is precisely the trade-off that an advisor makes before structuring the loan.

Ultimately, the decision is based on the overall net return, not on the interest.

This simulator calculates your monthly interest payment and the gross cost of the loan. The decision lies elsewhere: in the actual tax deductibility in relation to your rental income and marginal tax rate, the expected return on the remaining invested capital, and the security of the final repayment. The same rental investment financed with amortizing loans or with a bullet loan will produce very different net returns.

Balmont Conseil is an objective wealth management firm, a member of ANACOFI, with no capital ties to any bank. This objectivity allows us to structure your financing—choosing amortizing, bullet, or Lombard loans according to your objectives—and to select the loan agreement that serves only your best interests. Let's make an appointment to model the overall net return on your project.

Frequently Asked Questions

Does bullet loans really cost more?

In terms of gross interest, yes: since the principal is never repaid before maturity, interest accrues on the entire loan amount for the entire duration. However, this gross calculation is misleading for an investor. The interest is fully deductible from rental income, and the outstanding principal remains invested and continues to accrue interest. The correct indicator is the overall net return of the strategy—interest net of tax versus capital performance—and not the isolated interest cost.

Who is the purpose of bullet loans?

For investors who already have capital—secured as collateral—and rental income to offset taxable income, and who are in a high marginal tax bracket, the deductibility of interest and the preservation of invested capital are most effective. Conversely, for a borrower with low tax liabilities or without accumulated savings for repayment, a bullet loan becomes a poor calculation: it costs more without any benefit.

Why use a assurance-vie policy as collateral?

The capital you don't repay month after month should be used to pay off the loan at maturity. Investing it in a assurance-vie policy pledged to the bank serves two purposes: securing this final repayment while allowing the capital to accrue interest throughout the loan term. The contract operates in parallel with the financed investment, creating the leverage effect inherent in a bullet loan. This is the standard arrangement, but its optimization warrants some advice.

What happens when the loan matures?

The borrowed capital is repaid in a single lump sum, either from dedicated savings—often a pledged assurance-vie policy—or from a planned sale. This is the key point to be aware of with a bullet loan: this repayment must be anticipated and secured from the outset. A well-structured loan precisely defines the source of the final repayment; an improvised one risks having to sell urgently at maturity.

What does Balmont Conseil offer compared to my bank?

Balmont Conseil is an objective wealth management firm, a member of ANACOFI, with no capital ties to any bank. We offer a unique investment structure combining a loan, property tax benefits, and a mortgage guarantee: we model the overall net return and structure the entire package across the market, solely in your best interest. While a bank sells its loan and proprietary contract, we build the most effective structure for your assets.