Many countries encourage residents to become owners of their homes and lands by regulating, among others, tax-deductible interest payments from loans.
The cost of the loan becomes therefore:
C = P x I x (1 - T), where:
C = Cost of the loan
P = amount of loan (Principal)
I = Interest rate
T = Income Tax rate
For example, if the yearly interest for a loan of 100,000 EUR is 5% while the income tax rate is 35%, the resulting cost would be:
100,000 * 0.05 * (1-0.35) = 3,750 EUR each...