Go Back   English Forum Switzerland > Help & tips > Finance/banking/taxation  
Reply
 
Thread Tools Display Modes
  #21  
Old 16.01.2017, 16:51
aSwissInTheUS's Avatar
Forum Legend
 
Join Date: Nov 2007
Location: Zurich area
Posts: 12,273
Groaned at 93 Times in 84 Posts
Thanked 18,746 Times in 8,314 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: Pledging Pillar3a as mortgage collateral

Quote:
View Post
I'm don't understand this, do you mean when someone cashed-in their P3a there is an additional 15 year mortgage issued with a rate of 6.66%?
No there is an additional mortgage when some pledges the 3a instead of cashing it in and using the money to finance the house.

Examples?

House Value 1M.
Money in saving account 100k.
Money in pillar 3a 110k.

Traditional way.
Mortgage 800k + savings of 100k + pillar 3a 100k plus pay 5k tax for cashing in pillar 3a.
You are left with 5k on pillar 3a.

Pledging (Verpfändung) way:
Mortgage 900k + saving of 100k + pledge 110k from your 3a as a collateral (you need 10% as a security).
You are left with 110k on pillar 3a.

Now the problem. Within 15 years you must amortize the mortgage down to
65% of the house value, that's the law.

In the first case you must only amortize in total 150k or 10k each year. In the second case you must amortize 250k or ~17k each year.
__________________
"Okay, I just hope we don't wake up on Mars or something surrounded by millions of little squashy guys."
Reply With Quote
This user would like to thank aSwissInTheUS for this useful post:
  #22  
Old 16.01.2017, 17:21
Forum Veteran
 
Join Date: Mar 2010
Location: Greater Zürich Area
Posts: 920
Groaned at 119 Times in 76 Posts
Thanked 699 Times in 387 Posts
EPMike has an excellent reputationEPMike has an excellent reputationEPMike has an excellent reputationEPMike has an excellent reputation
Re: Pledging Pillar3a as mortgage collateral

There is a third way (what I have):

Mortgage 800k
Cash 200k

Indirect amortisation down to 65%: 1'000k*0.65= 350k-200k(cash)=150k
150k/15years = 10k p.a. indirectly into pillar 3a.

Now the question is amortise as much as possible every 5 years or wait until
the end of the 15 year period and do it at once?

P.S. I wasn't aware that here pledging meant pledging an existing 3a vs. pledging a 3a for indirekt amortization.

Quote:
View Post
No there is an additional mortgage when some pledges the 3a instead of cashing it in and using the money to finance the house.

Examples?

House Value 1M.
Money in saving account 100k.
Money in pillar 3a 110k.

Traditional way.
Mortgage 800k + savings of 100k + pillar 3a 100k plus pay 5k tax for cashing in pillar 3a.
You are left with 5k on pillar 3a.

Pledging (Verpfändung) way:
Mortgage 900k + saving of 100k + pledge 110k from your 3a as a collateral (you need 10% as a security).
You are left with 110k on pillar 3a.

Now the problem. Within 15 years you must amortize the mortgage down to
65% of the house value, that's the law.

In the first case you must only amortize in total 150k or 10k each year. In the second case you must amortize 250k or ~17k each year.
Reply With Quote
  #23  
Old 16.01.2017, 17:30
aSwissInTheUS's Avatar
Forum Legend
 
Join Date: Nov 2007
Location: Zurich area
Posts: 12,273
Groaned at 93 Times in 84 Posts
Thanked 18,746 Times in 8,314 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: Pledging Pillar3a as mortgage collateral

Quote:
View Post
Now the question is amortise as much as possible every 5 years or wait until
the end of the 15 year period and do it at once?
Depends on the condition of your mortgage and how flexible it is.

As said, from a payout tax point of view you could save around CHF 500. With interest the potential saving is higher. More interest, more saving by cashing in earlier.(As said pillar 3a has a hidden capital gains tax.

Quote:
View Post
not self employed, unmarried person, no taxable church affiliation, 0 children, living in Zurich City in 2017, assuming 0% interest and CHF 6700/year added:

Payout tax for CHF 33500 (a five years saving) is CHF 1497 (or 299 per year)
for CHF 100'500 (15 year) it is CHF 4'983 (or 332 per year)
Reply With Quote
  #24  
Old 16.01.2017, 17:48
Forum Veteran
 
Join Date: Feb 2012
Location: CH
Posts: 2,304
Groaned at 87 Times in 73 Posts
Thanked 2,002 Times in 1,123 Posts
ivank has a reputation beyond reputeivank has a reputation beyond reputeivank has a reputation beyond reputeivank has a reputation beyond repute
Re: Pledging Pillar3a as mortgage collateral

Quote:
View Post
Now the question is amortise as much as possible every 5 years or wait until
the end of the 15 year period and do it at once?
If you amortize now instead of waiting further, you win corresponding part of mortgage interest payment, but lose tax savings on it, but win free market investment return on it, and lose pillar 3a return. Withdrawal tax can be basically ignored so long as it roughly stays at the same level, which it does - it's at 4-5% for any small amount, anything under 100k for sure. So:

Amortize if [mortgage rate] * (1 - [marginal income tax rate] + [post-tax free market investment return]) > [pillar 3a return].
Reply With Quote
This user would like to thank ivank for this useful post:
  #25  
Old 16.01.2017, 18:08
Forum Veteran
 
Join Date: Mar 2010
Location: Greater Zürich Area
Posts: 920
Groaned at 119 Times in 76 Posts
Thanked 699 Times in 387 Posts
EPMike has an excellent reputationEPMike has an excellent reputationEPMike has an excellent reputationEPMike has an excellent reputation
Re: Pledging Pillar3a as mortgage collateral

Quote:
View Post
If you amortize now instead of waiting further, you win corresponding part of mortgage interest payment, but lose tax savings on it, but win free market investment return on it, and lose pillar 3a return. Withdrawal tax can be basically ignored so long as it roughly stays at the same level, which it does - it's at 4-5% for any small amount, anything under 100k for sure. So:

Amortize if [mortgage rate] * (1 - [marginal income tax rate] + [post-tax free market investment return]) > [pillar 3a return].
I think [post-tax free market investment return] does not apply since you do not actually free up that money as it is locked in the property.
Reply With Quote
  #26  
Old 16.01.2017, 18:11
Forum Veteran
 
Join Date: Feb 2012
Location: CH
Posts: 2,304
Groaned at 87 Times in 73 Posts
Thanked 2,002 Times in 1,123 Posts
ivank has a reputation beyond reputeivank has a reputation beyond reputeivank has a reputation beyond reputeivank has a reputation beyond repute
Re: Pledging Pillar3a as mortgage collateral

Quote:
View Post
I think [post-tax free market investment return] does not apply since you do not actually free up that money as it is locked in the property.
You free up a part of your income that used to go towards mortgage interest payment, and hence can reinvest it in a better place after amortization.

It's multiplied by mortgage rate, so the profit from it will be relatively small anyway. So unless the mortgage rates rise, or pillar 2/3 rates drop even further it probably doesn't make much sense to amortize at current typical rates. But your rates may vary of course..
Reply With Quote
The following 3 users would like to thank ivank for this useful post:
  #27  
Old 16.01.2017, 23:11
Member
 
Join Date: Jul 2011
Location: Gland
Posts: 220
Groaned at 0 Times in 0 Posts
Thanked 131 Times in 92 Posts
Macer is considered knowledgeableMacer is considered knowledgeableMacer is considered knowledgeable
Re: Pledging Pillar3a as mortgage collateral

Quote:
View Post
it probably doesn't make much sense to amortize at current typical rates.
most banks/lenders seem to require that the loan is amortised to some degree... either directly or indirectly via a 3rd pillar. I guess this mandatory amotisation is a requirement from FINMA? Is it permitted to use an alternative investment for the mandatory amortisation of a loan? Or do FINMA stipulate that indirect amortisatin has to use a 3rd pillar?
Reply With Quote
  #28  
Old 17.01.2017, 15:39
Junior Member
 
Join Date: Dec 2016
Location: Zurich
Posts: 75
Groaned at 0 Times in 0 Posts
Thanked 9 Times in 4 Posts
justcamehere has no particular reputation at present
Re: Pledging Pillar3a as mortgage collateral

Quote:
View Post
If you amortize now instead of waiting further, you win corresponding part of mortgage interest payment, but lose tax savings on it, but win free market investment return on it, and lose pillar 3a return. Withdrawal tax can be basically ignored so long as it roughly stays at the same level, which it does - it's at 4-5% for any small amount, anything under 100k for sure. So:

Amortize if [mortgage rate] * (1 - [marginal income tax rate] + [post-tax free market investment return]) > [pillar 3a return].
In order to pledge Pillar3a, do banks require that pillar3a is held with them, or does any pillar3a account usually qualify ?
Reply With Quote
  #29  
Old 17.01.2017, 15:56
Forum Veteran
 
Join Date: Feb 2012
Location: CH
Posts: 2,304
Groaned at 87 Times in 73 Posts
Thanked 2,002 Times in 1,123 Posts
ivank has a reputation beyond reputeivank has a reputation beyond reputeivank has a reputation beyond reputeivank has a reputation beyond repute
Re: Pledging Pillar3a as mortgage collateral

Quote:
View Post
most banks/lenders seem to require that the loan is amortised to some degree... either directly or indirectly via a 3rd pillar. I guess this mandatory amotisation is a requirement from FINMA? Is it permitted to use an alternative investment for the mandatory amortisation of a loan? Or do FINMA stipulate that indirect amortisatin has to use a 3rd pillar?
Well, finma's (or rather banks self-regulating association) rules do say that indirect amortisation is possible over pillar 3a, life insurance or other pledged "bankable assets". Ask your bank what assets they'd be willing to accept. But conditions in the end might be just as bad as pillar 3, or even worse - without the tax advantage.

Quote:
View Post
In order to pledge Pillar3a, do banks require that pillar3a is held with them, or does any pillar3a account usually qualify ?
My bank asked me to hold the fund with them, yes.
Reply With Quote
Reply




Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Mortgage? Which bank offers the best mortgage rates? fashionister Finance/banking/taxation 46 20.01.2020 14:00
Mortgage Collateral Agreement dannyt986 Finance/banking/taxation 12 02.04.2014 17:23
Wikileaks video: Collateral Murder (Iraq war) mirfield International affairs/politics 94 26.12.2010 20:06
what to put in the 20% downpayment or collateral for mortgage jrm Finance/banking/taxation 7 09.10.2010 10:18


All times are GMT +2. The time now is 14:32.


Powered by vBulletin® Version 3.8.4
Copyright ©2000 - 2020, Jelsoft Enterprises Ltd.
LinkBacks Enabled by vBSEO 3.1.0