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Old 04.05.2016, 13:18
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Home purchase and pension fund, how much can I use?

Just a quick question if anyone knows the answer. I've been told that you need to pay down 10% by cash for a purchase and the other 10% can come from your pension pillar 2 and 3. Is that correct?

So then all that needs to be clear, is that I am able to pay the mortgage based on my salary and a calculation of 5% interest rate. I hear migros bank uses 4.5% rate also.

However if my income level dosent meet those numbers, can I choose to commit more of the pillar 2 or 3 pension money?
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Old 04.05.2016, 13:34
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Re: Home purchase and pension fund, how much can I use?

Your information is correct. Nowadays it's not possible anymore to pay less than 10% cash.
I am not sure regarding Migros Bank but Swissquote usually has the best mortgage interest. When I re-mortgaged my property last year, I ended up at Thurgauer Kantonal bank. An other option could be to get a mortgage via an insurance (i.e. Swiss Life).
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Old 04.05.2016, 14:08
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Re: Home purchase and pension fund, how much can I use?

Thanks for the confirmation on the matter. I have a guy who is shopping around for the best mortgage rates also for me. But i'll look at swissquote as well and I think he will provide the swisslife mortgage also. I have an appointment with Schaffhausen Kantonal bank also next week.

It still dosen't answer my primary question about the pension fund. This affordability ratio should be under 40% from what I understand. Some places say 33%. Can I lower that by adding more from my pension?
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Old 04.05.2016, 14:23
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Re: Home purchase and pension fund, how much can I use?

Answer: Yes, you should be able to withdraw funds from your pension to make a larger downpayment on your new house, thus improving the results of the bank's "affordability calculation".

Swiss Authorities Online (ch.ch) says this:

"Early withdrawal of pension fundsIn special cases, you may draw on your pension (pension assets) before retirement, if you intend to purchase property, become self-employed or leave Switzerland permanently, for example.



Early withdrawal for the purpose of acquiring property for personal use
You may use your pension funds to purchase property, to repay mortgage loans or to acquire shares in a housing cooperative. Please note:
  • Early withdrawals may be made no more than once every five years.
  • Up until the age of 50, the entire retirement fund may be withdrawn.
  • After the age of 50, the amount that may be withdrawn is limited. Married persons must provide the written consent of their spouse (the same applies to persons in registered partnerships).
  • If you decide to sell property purchased with an early withdrawal you must generally refund the amount withdrawn.
  • Early withdrawals reduce the voluntary old age, survivors' and invalidity pensions.
What you need to do

Ask your pension company (pension fund or vested benefits institution) about the withdrawal procedures and deadlines. The pension company will let you know what documents you need."



https://www.ch.ch/en/withdraw-pension-early/

A good source for pension information is finanzmonitor.com. This article might be of interest:

http://www.finanzmonitor.com/2-saule...pensionskasse/
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Old 05.05.2016, 01:37
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Re: Home purchase and pension fund, how much can I use?

Note there are two ways to use your pillar 2 pension.

First way is to 'pledge' - i.e. sign over a portion as a guarantee only. This does not reduce your mortgage commitment but helps reach the 20% 'own funds'. At least 10% must be paid in cash though. With this option there is no tax charge and your pension is unchanged - but you risk a claim against your pension in the event you default the mortgage. As your mortgage level is not reduced by the amount of the pledge, your interest payments are higher e.g. 10% cash, 10% pledge - your 'borrowed money' is still 90%. For that reason it is not the option you want.

The other way is a cash withdrawal. Here the money is paid out from the pension to help fund the purchase (as much as you need to reduce your mortgage to an affordable level). However there are some caveats:

1. You will be taxed on the amount withdrawn. This tax payment has to come from your own funds and must be paid before the withdrawn funds are paid out.
2. If you made more than the statutory payments into the pension in the previous 3 years (and thus received additional tax benefits) you will incur additional tax charges when you file your tax return.
3. Any non-mandatory contributions in future will receive no tax benefit until the withdrawn amount has been fully repaid.
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Old 06.05.2016, 11:37
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Re: Home purchase and pension fund, how much can I use?

Thanks for the info provided. I'm now clear on how the piller2 and piller3 can be used against a home purchase.

Its essentially a property purchase with requirement to build on it by the seller's company within a certain period of time. So I need to meet the goals only for 1/3 the whole cost today and work with bank and the additional savings needed for the final build price.

Meeting some banks and finance people next week, when i'll know more.
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Old 01.12.2018, 09:00
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Re: Home purchase and pension fund, how much can I use?

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....


Early withdrawal for the purpose of acquiring property for personal use:
You may use your pension funds to purchase property, to repay mortgage loans or to acquire shares in a housing cooperative. Please note:
  • Early withdrawals may be made no more than once every five years.
  • Up until the age of 50, the entire retirement fund may be withdrawn.
  • After the age of 50, the amount that may be withdrawn is limited. Married persons must provide the written consent of their spouse (the same applies to persons in registered partnerships).
  • If you decide to sell property purchased with an early withdrawal you must generally refund the amount withdrawn.
  • Early withdrawals reduce the voluntary old age, survivors' and invalidity pensions.
Is there a fixed calculation /% for how much can be withdrawn for repaying part of the mortgage?

Quote:
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....

The other way is a cash withdrawal. Here the money is paid out from the pension to help fund the purchase (as much as you need to reduce your mortgage to an affordable level). However there are some caveats:

1. You will be taxed on the amount withdrawn. This tax payment has to come from your own funds and must be paid before the withdrawn funds are paid out.
2. If you made more than the statutory payments into the pension in the previous 3 years (and thus received additional tax benefits) you will incur additional tax charges when you file your tax return.
3. Any non-mandatory contributions in future will receive no tax benefit until the withdrawn amount has been fully repaid.
Is there a separate tax rate for this withdrawal, or is added to my (presumptive) current year's income?
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Old 01.12.2018, 09:19
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Re: Home purchase and pension fund, how much can I use?

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Is there a separate tax rate for this withdrawal, or is added to my (presumptive) current year's income?
I recently got the tax bill four years after the fact, it was a separate (and much lower) rate, just under 5% for commune, canton, and federal combined.

Tom
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Old 01.12.2018, 14:21
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Re: Home purchase and pension fund, how much can I use?

I would aim to pledge if possible. The reasons being, interest is deductible and it makes it easier to refinance or get another mortgage in the future. If you withdraw then you must repay the withdrawn funds in with your own cash savings. We are stuck with UBS for this reason and locked into a mandatory 3a pillar account which was part of the amortization to get the deposit to 33% of valuation. Fast forward 10years and looking at another property for investment and once we use our free cash to repay 2nd pillar the numbers don't work. This is despite the current mortgage being about 30% of property value ( not sales value which is higher). The initial rate was very good but if you are not in the position to leave a bank you are stuck with a weak negotiation position to get better than normal rates.
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Old 01.12.2018, 14:30
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Re: Home purchase and pension fund, how much can I use?

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Is there a fixed calculation /% for how much can be withdrawn for repaying part of the mortgage?
?
I believe the value at age 50 is where the 10% max is calculated from.
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Old 01.12.2018, 15:31
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Re: Home purchase and pension fund, how much can I use?

10% max?

F.ex. if i have 50k in my pension fund account, how much can i withdraw at age 51?
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Old 01.12.2018, 16:09
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Re: Home purchase and pension fund, how much can I use?

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10% max?

F.ex. if i have 50k in my pension fund account, how much can i withdraw at age 51?
What was the value when you were 50? Possibly 5k, your annual certificate will tell you.
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Old 01.12.2018, 17:54
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Re: Home purchase and pension fund, how much can I use?

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I would aim to pledge if possible. The reasons being, interest is deductible and it makes it easier to refinance or get another mortgage in the future. If you withdraw then you must repay the withdrawn funds in with your own cash savings. We are stuck with UBS for this reason and locked into a mandatory 3a pillar account which was part of the amortization to get the deposit to 33% of valuation. Fast forward 10years and looking at another property for investment and once we use our free cash to repay 2nd pillar the numbers don't work. This is despite the current mortgage being about 30% of property value ( not sales value which is higher). The initial rate was very good but if you are not in the position to leave a bank you are stuck with a weak negotiation position to get better than normal rates.
I don't really understand your post, but if you're employed by UBS then you should have on-line access to your 2-pillar pension benefits.
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Old 01.12.2018, 18:02
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Re: Home purchase and pension fund, how much can I use?

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I don't really understand your post, but if you're employed by UBS then you should have on-line access to your 2-pillar pension benefits.
Not employed by but have a loan with them.
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