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Old 02.01.2019, 08:00
Calito Calito is offline
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Taxes are high on fully owned properties. Thats why one pays the morgage off to the bank over a lifetime. The bank owns it in the meantime.

https://www.ch.ch/en/real-estate-foreign-national/
Am I reading this link correctly? As a third country national I cannot buy property with the intention of renting it out? That is, it won't be owner occupied.

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Third-country nationals
You do not require a permit to buy a main residence (e.g. single-family house or owner-occupied flat) or building land where you live if you meet the following requirements:

** You hold a valid residence permit, generally a B permit for foreign nationals.
** You will live in that main residence for as long as you hold residence in that location.
** If you wish to build on the land that you have purchased, you must do so within one year.

You will require a permit in order to purchase the following types of apartment:
** Holiday apartment
** Housing unit in an apparthotel (hotel with flats)
** Second home
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The 20% minimum down payment is the same for all cantons. At least 10% of that has to be cash but the rest can be from the pension fund.
Is there an advantage to using pension fund as downpayment? Thinking of the equivalent 401k in US - this is typically advised against as the growth of the retirement account gets stunted from what I have heard.

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20% is the normal minimum, 10% can instead be a pledge against a pillar 2 pension fund, (meaning that you only need 10% cash on hand) but that isn't relevant until you've built up such a Swiss fund.
Any advantage to using 10% from a pension fund? That is, assuming 20% can be provided as cash downpayment - is there any reason using the pension fund would be advantageous?

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It is normal to amortize down to 65% loan-to-value, and then pay only interest. This means that when the mortgage terminates (10 years is the longest fixed mortgage I've seen advertised) you need to refinance.
Sorry, unable to parse this - if you only pay interest after amortization to 65% ltv, then when do you pay off the principal?

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For this reason they have an affordability criteria based on what happens if interest rates go to 5% - will making a 5% p/a interest payment on the remaining balance be more than 1/3 of your pre-tax income? A subtle point that matters for some is how much of your bonus and stock grants should count for this purposes, and different banks can do this differently.

So if you have 20%+ down, e.g. because you sold a place and had real equity in it, you can work backwards to see how much you can afford. Also, you might get a lower rate if you can put 35% down and avoid amortization.
Do you mean to say if 35% is paid upfront as downpayment, you can just pay interest for ever (refinancing at the end of each loan term) without paying the remaining principal ever? Are the taxes on a fully owned property that high?

I feel like I am missing a critical piece of information for this to make more sense

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There is a comparis database showing that advertised apartment purchase prices in Zurich went from 6k/m^2 in 2007 to around 10k in 2012 and since then have more or less slowly risen past 12k/m^2. Whether this is a sign of strength, or a sign of a potential bubble is left as an exercise for the reader.
Interesting - my understanding of the US market is the 2008-2009 recession caused a pretty significant dip in prices but the market has recovered significantly since then. Especially California. So a similar dip did not happen in CH due to recession? (Comparis link is timing out for me, I'll keep trying).

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That surprises me. I know no one in the US foreign or domestic that had to put down 20%.

In Switzerland you need 20% down.
miniMia - this has been a requirement since I bought back in July 2015. Not sure how it was prior to that. Also, this is part of the difference between getting a conventional loan vs a jumbo loan.

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Actually, this brings up another very important point for people used to the US system to be aware of. In most US states, state law requires that you be allowed to repay your mortgage at any point without penalty, and what you say is literally true.

In Switzerland, this is not the case and it is normal for there to be a penalty based on the interest that the bank loses due to your prepayment. Therefore it is dangerous to assume that you can just pay it off and walk away - if rates drop (not that I see how they can get much lower than where they are now) you might need to pay a penalty similar to the remaining interest in order to terminate the mortgage early.
Ah, did not realize that.
This seems disadvantageous and in favor of banks - does this incentivize banks to keep interest rates low?

Last edited by 3Wishes; 02.01.2019 at 10:57. Reason: merging consecutive replies
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