View Single Post
  #7  
Old 29.07.2020, 14:19
aSwissInTheUS's Avatar
aSwissInTheUS aSwissInTheUS is offline
Forum Legend
 
Join Date: Nov 2007
Location: Zurich area
Posts: 12,778
Groaned at 99 Times in 88 Posts
Thanked 19,576 Times in 8,681 Posts
aSwissInTheUS has a reputation beyond reputeaSwissInTheUS has a reputation beyond reputeaSwissInTheUS has a reputation beyond reputeaSwissInTheUS has a reputation beyond reputeaSwissInTheUS has a reputation beyond reputeaSwissInTheUS has a reputation beyond repute
Re: Apartment or What else? Any advice, Please.

Quote:
View Post
2) I read some of your comments on this forum that if a person paid off the mortgage, then, s/he will be hit so hard and bad by paying lots of taxes or other things I do not know. Not sure I understood, But, Who wants to live and the bank is knocking on the door every month. Could you please elaborate?
There is no substantial, direct real estate tax in Switzerland. Instead an other unique system is used. If you have property which you use for your own an
imputed rental value is added to your income (it is around 60% of the what you would charge a tenant). On the other hand you can deduct maintenance cost and mortgage interest payments from your income.

For every CHF 1000 you pay in interests you safe around CHF 250 - 400 in taxes (depending on your actual marginal tax rate). As you see, to save taxes you must spend more money than you actually save. Banks will heavily focus on the saving taxes aspect. Because everyone wants to save taxes, not matter what the costs is. Sometimes literally.

In the whole scheme the additional wealth and wealth tax is irrelevant. It goes like this:

You have 200k in cash, 0% interest and a 200k mortgage for 1.5% interest. Marginal tax rate is 30%. Taxable net wealth CHF 0.

Option 1: You repay the mortgage. Your tax burden increases by CHF 900. You save CHF 3000 in interest payments: Net gain CHF 2100.

Option 2: You keep the mortgage but invest the 200k in a product which has a return of at least 1.5%, which is also a net gain of CHF 2100 after taxes.
The return can be as low as 1.05% when no interest and dividends are involved but the gain is mostly or only from increased value of the underlying securities as there is usually no capital gains tax.

Your friendly bank, which only wants your very best (your hard earned money ) has just this very nice product (with super crazy high TER ) for this.

https://www.credit-suisse.com/ch/en/...en-201804.html
__________________
On Hiatus- Normal operation will resume 22.02.2022 22:02:20.22
Reply With Quote
The following 2 users would like to thank aSwissInTheUS for this useful post: