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Old 02.01.2019, 20:04
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Re: Advisable to buy property in Zurich?

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For example, say you buy a CHF 100,000 apartment. You put down 20% (CHF 20,000) and you take out a first mortgage of 15% (CHF 15,000) which gets fully repaid over a number of years, and a second mortgage of 65% (CHF 65,000) which remains outstanding. The way the system works is that (i) house prices would need to fall by 35% before the bank would take a hit on the CHF 65,000 second mortgage which is unlikely to happen outside of a shock to the system, and (ii) the power of inflation in house prices erodes the value of the debt. So, for example, if the house doubles in value over a 20 year period, and is now worth CHF 200,000, the debt is still the same at CHF 65,000 which increases the collateral coverage for the bank.
The first charge is for 65%, second charge for 15%, interest rate is higher on 2nd charge due to higher risk as it's payable after the first mortgage is paid in full.
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