The "Buying a house in Switzerland" thread

[pinot]

Any one know about the possibility of using retirement account (401k I think is similar to 3rd pillar) as collateral as part of the typically required 20% down payment?

If so anyone know about the proportion of retirement collateral is allowed; 10%?

I will have meetings with banks soon but wanted to get some real experience feedback first.

[miniMia]

	Quote:	pinot
	Any one know about the possibility of using retirement account (401k I think is similar to 3rd pillar) as collateral as part of the typically required 20% down payment? If so anyone know about the proportion of retirement collateral is allowed; 10%? I will have meetings with banks soon but wanted to get some real experience feedback first.

401K in the US? You'd have to cash it in and bring it over. You can't use foreign assets collateral as they can not be seized in case of foreclosure, etc.

I don't think there was a limit as to how much you can use. I think you can pledge the whole 20% in retirement funds.

[ipoddle]

Just thought I'd add my, almost entirely positive, experience.

Wasn't even thinking about buying.. mooching on a website noticed a flat just 100m from where I live.

"Only" 660k in Allschwil BL, 3 beds, newish kitchen, separate bathroom, shower and toilets.. immaculate condition...100sq m and fair sized garden. Had a look the next day.. perfect for my needs.. only the bathrooms need renovation for aesthetic purposes.

Found out that my company provides mortgages.. 1.8 fixed for 5 years interest only. Withdrew big chunk of pension as the deposit.

Said I'd buy it 2 days after seeing it.. notary fixed up in a matter of weeks..sellers happy to defer the sale by a few months so not hit with double rent/mortgage.

Buying Costs (as opposed to moving costs)
18k cash deposit to secure the sale - but I managed to include this in the mortgage
1k for the notary
10k pending tax hit for taking out my pension (that confused me for a while.. but it's effectively a very low tax on prior salaries that were never previously taxed)


Benefits:
Going from renting a slightly bigger, slightly newer 3 bed flat at 2.6k per month to 800pm for the mortgage plus 450pm for a 'building' fund.
Have my own garden
Can decorate how I like

Assuming an ongoing tax neutral position I am around 1200chf per month better off for a very similar lifestyle. The only real gamble is that the money I took out of my pension performs better as part of the flat's value rather than in the pension fund .

[bigblue2]

We are now home owners again, went to the bank yesterday and had to sign about 6 forms in duplicate, the bank then took us to the notary who went through the contracts with the sellers and there solicitor in german and english, took about an hour, then signed 10 or so copies of the contract and got the keys, all sorted. now the fun begins

[tesso]

Congratulations.
Hope you enjoy living in your new home

[PaddyG]

	Quote:	pinot
	Any one know about the possibility of using retirement account (401k I think is similar to 3rd pillar) as collateral as part of the typically required 20% down payment? If so anyone know about the proportion of retirement collateral is allowed; 10%? I will have meetings with banks soon but wanted to get some real experience feedback first.

Yes, you can. In fact apart from cold, hard cash, it's the most common way of financing the deposit. We actually used our comapny pensions, as we didn't have a 3a at the time, but I know the 3a is also used.

[meloncollie]

	Quote:	bigblue2
	We are now home owners again...

Congratulations, BB2!

Glad to hear that the process went smoothly - all the best in your new home.

I can tell you that the rules vary from bank to bank and risk to risk.

I just dumped 30% deposit down wholly from my private pension. Raiffeisen was cool with that.

[JanerMacP]

We made an offer on a house last night and it was accepted this morning - were so excited!

I'm going to go through this thread in detail and make sure I note everything down before signing the contract.....but so far so good!!

[tesso]

Congratulations enjoy this exciting time

[cricketer]

Congrats!!
I have given up on this

	Quote:	bigblue2
	We are now home owners again, went to the bank yesterday and had to sign about 6 forms in duplicate, the bank then took us to the notary who went through the contracts with the sellers and there solicitor in german and english, took about an hour, then signed 10 or so copies of the contract and got the keys, all sorted. now the fun begins

[sophierobert]

Hi

I heard that each canton has its own property law when it's relating to foreigners' buying, also it's subject to the permit one holds, so as a B permit holder (EU citizen) in the city of Zurich:
1/ Can I buy a flat to rent it out straight away (i.e. as an investment, not as an owner-occupied flat)?
2/ If the answer to the first question is yes, then in case of permanent departure from Switzerland, do I have to sell the flat within x years or can I continue to rent it out?

Any feedback would be greatly appreciated.

Thanks

[Shakey]

Ours was an extremely positive (if perhaps naive) process. My wife (CH) and I (CDN) had been commuting to jobs in Zurich and Bern from Olten (it's actually not as bad as many think) and were making the move to Bern when my wife changed jobs in 2004. We had planned to rent in Bern, but a look at the rental rates made us at least take a look at house costs. We simply looked on immoscout with the criteria for anything within a 15km radius of Bern. The naive part was not considering transit connections, schools etc., but it wasn't so important then. We found a few promising candidates and drove on a Sunday to just have a look around. One was particularly interesting for us, so we made an appointment to view it. It was a private sale in the Berner Seeland, between Bern and Lyss. We had a very informal viewing on one day, e-mailed back an offer a bit lower than the asking price (small faux pas, I guess), then reached an agreement on the phone. The deal was closed in only a few days (we had already been to several banks to have an idea of what was possible). Went through the paperwork with the Notar with the seller, shared a drink and it was done. We went with UBS at the time (never again, based on their attitude and practices in the last 5 years) as they were competent at the time. We have since had endless discussions with our rep about the folly of the Swiss indirect amortisation scheme; I finally had to pull out a notebook and Excel and prove to him that it no longer works in an economy that has progressed beyond dependable returns on other investment vehicles (but that's another topic).

With some regret, we will have to go through the process again as we are moving to Zurich (will be the subject of another thread for advice). We really, really like our house and our little farming town. It is dead silent in the evenings, in 200m walk we are in the forests, with a view out across the Alps or the Jura, depending on direction, and yet still a 20 minute traffic-free commute to work. We'll miss it. The house was also a great find - built by a local wood construction company in 1998, before "pre-fab" became so popular and the builders pushed the price and quality. Solid, high quality, everything fits, a modern ground-source heat pump, and the house is part of a cluster of homes that share a separate parking garage, so a traffic-free and quiet little neighbourhood. Brilliant.

I can certainly say we are in the group of people who had a very positive buying experience.

[jeremy]

	Quote:	Shakey
	We have since had endless discussions with our rep about the folly of the Swiss indirect amortisation scheme; I finally had to pull out a notebook and Excel and prove to him that it no longer works in an economy that has progressed beyond dependable returns on other investment vehicles (but that's another topic).

Hi Shakey, can you expand on your comment about indirect amortization? We have made downpayment on a flat under development, but have not secured the hypothek yet. Probably will finalize financing within the next 3-6 months. Are you recommending direct amortization, or some other scheme? If too off-topic, you can reply via direct message. (not looking for in depth financial advice, just wondering about your reasoning). Thanks!

[Shakey]

I think it depends on each person's situation, to be honest, and also what your end goal is. My statement was probably a bit strong and I don't propose to offer advice. Let's just say that for our own financial situation, goals and interpretation of security, we had chosen a more substantial direct amortisation of our house than most would, and we have been able to convince ourselves that this makes sense (for us). Our total annual costs are demonstrably and substantially lower, considering also taxes, Eigenmietwert etc. etc. The downside, of course, is that this money is locked into the house, so you have to take care to maintain the degree of liquidity that you want.

Simply run some numbers on a spreadsheet and decide what suits your own goals best.

[jeremy]

thanks for the reply shakey. will run the numbers as well.

[Kittster]

	Quote:	sophierobert
	Hi I heard that each canton has its own property law when it's relating to foreigners' buying, also it's subject to the permit one holds, so as a B permit holder (EU citizen) in the city of Zurich: 1/ Can I buy a flat

I don't know about the permit situation but I think the question sort of stops at the being able to buy at all, it's incredibly hard to get something in the city of Zurich. And then if you want to rent it out at a profit, it gets even harder, unless you are prepared to have a large sum tied up as the downpayment. One person in the building I'm going to move into has bought a flat to rent, it's already on the market - he's asking CHF 2,700 (incl. Nebenkosten and one parking space) for a 3.5 room ground floor flat just outside Oerlikon. It's been on the market for three weeks now and I'm not sure he'll shift it at that price (he's already reduced it by fifty francs compared to the first listing). Or maybe he will, housing costs have gone a bit bonkers in the past three to four years.

[jaudi]

	Quote:	Shakey
	I think it depends on each person's situation, to be honest, and also what your end goal is. My statement was probably a bit strong and I don't propose to offer advice. Let's just say that for our own financial situation, goals and interpretation of security, we had chosen a more substantial direct amortisation of our house than most would, and we have been able to convince ourselves that this makes sense (for us). Our total annual costs are demonstrably and substantially lower, considering also taxes, Eigenmietwert etc. etc. The downside, of course, is that this money is locked into the house, so you have to take care to maintain the degree of liquidity that you want. Simply run some numbers on a spreadsheet and decide what suits your own goals best.

Just wanted to say - what a well written, great piece of advice that is and shame on the banks/IFAs etc. who refuse to make such impartial statements. Anyone considering a house purchase should model the repayments over different time periods, different rates, different amortisations and repayment flexibility and consider the balance between maintaining cash liquidity and the cost of interest over the loan period.

[sophierobert]

Hi,

I also submitted the question to the notary of Zurich (in English) and here is the answer I had (in German):
"Um eine Stockwerkeineheit zu kaufen, brauchen Sie keine Bewilligung. Als Eigentümer eines Grundstückes können Sie voll und ganz darüber verfügen, d.h. auch weiter vermieten.
Sie müssen die Stockwerkeinheit nicht wieder verkaufen, da zwar EU Bürger ohne Wohnsitz in der Schweiz keine Grundstücke kaufen können, ist der Zeitpunkt der Eigentumsübertragung entscheidend. Es können sich aber durchaus steuerrechtliche Folgen ergeben. Dies müssen Sie aber bei einem Anwalt oder bei einem Treuhänder abklären."

With my poor German, I sort of understood that I had the right to buy a property and rent it out, but it seems the notary's answer also refers to the property sale and some tax issues, could anybody fluent in German help me to translate the answer in plain English?

Thanks!

Sophie

[miniMia]

	Quote:	sophierobert
	Hi, I also submitted the question to the notary of Zurich (in English) and here is the answer I had (in German): "Um eine Stockwerkeineheit zu kaufen, brauchen Sie keine Bewilligung. Als Eigentümer eines Grundstückes können Sie voll und ganz darüber verfügen, d.h. auch weiter vermieten. Sie müssen die Stockwerkeinheit nicht wieder verkaufen, da zwar EU Bürger ohne Wohnsitz in der Schweiz keine Grundstücke kaufen können, ist der Zeitpunkt der Eigentumsübertragung entscheidend. Es können sich aber durchaus steuerrechtliche Folgen ergeben. Dies müssen Sie aber bei einem Anwalt oder bei einem Treuhänder abklären." With my poor German, I sort of understood that I had the right to buy a property and rent it out, but it seems the notary's answer also refers to the property sale and some tax issues, could anybody fluent in German help me to translate the answer in plain English? Thanks! Sophie

We've talked many times on the housing threads about the tax implications when selling a property. That's what his says "Selling could incur tax implications".

Also, if you read some of the thread on purchasing real estate there are some very good guides posted, both web links and pdf files.

The "problem" with buying rental property is not necessarily the permit (I'm talking for EU) it's the financing. It could be very difficult to get a mortgage for a rental property and/or you may be asked for a 50% or more down payment.

There are some restrictions for non-resident foreigners from buying some large properties/houses and land.