Buying a property with my 3rd pillar


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If you're thinking of buying your own home, you're probably wondering about the financing options available to you. If so, you need to know that it's possible to use your 3rd pillar for a property purchase. But how exactly does this work? Are there different ways of using your personal pension? You'll find some answers in this article.

Withdrawing from the 3rd pillar to become a homeowner

While the function of the 3rd pillar mainly concerns retirement, this type of provident fund also enables you to access home ownership. In fact, the capital paid into a 3rd pillar 3A - or linked individual pension plan - can be withdrawn before retirement age for property-related reasons. This could involve the purchase or construction of a home, as long as it concerns your principal residence. However, this withdrawal condition does not apply to a second home or rental property. The 3rd Pillar 3A can also be withdrawn in the event that you wish to repay any mortgages, or to acquire ownership interests in a home in which you live.
When the 3rd Pillar 3A is used for a property purchase, renting out the property in question is conceivable as long as you can prove that you are unable to use it for yourself. This could be the case if you are planning to move house, for example.
Furthermore, early withdrawal of all or part of your individual pension provision will result in taxation on the capital. It's also important to remember that if you're married, the funds can only be released with your spouse's agreement.
As for the 3rd pillar 3B, also known as free pension provision, it can be used whenever you like, for no particular reason.
In any case, buying a property requires at least 20% of the home's value as a personal contribution. You're also likely to need a mortgage, which can be repaid using two different amortization solutions.

Direct amortization with the 3rd pillar for a property purchase

This involves making a regular payment to the bank, using the money in the 3rd pillar to enable repayment of the mortgage and its interest, little by little. In fact, thanks to direct repayment, the interest is gradually reduced, providing a certain amount of relief. On the other hand, it also means an increase in the tax burden, as mortgage interest can no longer be deducted from taxable income. And don't forget that 3rd pillar withdrawals are also subject to tax, as mentioned above. This is why it makes more sense to withdraw your retirement capital successively every 5 years, as permitted by the conditions for early withdrawal.

Indirect amortization or pledging of the 3rd pillar

When financing your real estate project, it is possible to pledge your 3rd pillar. The advantage of this solution is that you continue to benefit from the tax deductions offered by individual pension provision. On the other hand, it is more costly than direct repayment, since the interest does not reduce over time. As far as pledging is concerned, all you have to do is continue to make payments into your linked pension account or insurance policy with your bank, as you are accustomed to doing. The only thing that changes is that the savings are placed as collateral. This way, when the mortgage comes due, the lender - be it a bank or an insurance company - can recover the capital to repay part of the mortgage. As for the interest, it is paid to you in full.
Using your 3rd pillar for a property purchase is therefore a perfectly feasible option. However, it's essential to opt for the best financing and repayment solution for the mortgage you'll almost certainly need to take out. To do this, what could be more reassuring than to surround yourself with the advice of an expert, who can assure you that you're making the right choice? Don't hesitate to contact us for all your real estate projects!
Joffrey Maitre
Updated on: 31.01.2024Written by Joffrey MaitreHead of private provision department at Comparea
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