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Old 24.04.2019, 18:44
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Another mortgage thread!

Hi everyone. We are in the process of planning our move to CH for early 2020. I've reviewed the mortgage threads, of which there are many, and have a few follow-up questions for you:

1. Is residence permit status controlled as part of the mortgage application process? (Meaning: do we need to wait for the B-Permit to arrive in the mail? Is the permit pre-approval letter from the cantonal migration authority sufficient?)

2. Does the US citizen blacklist apply to mortgages in addition to deposit account relationships? (I am a dual US-German citizen.) The forum suggests the answer is yes, but I wanted to verify.

3. An alternative pathway would be to purchase the house with a short term US-based loan secured by retirement assets and then pay off that loan with a Swiss-based cash-out mortgage for, say, 70% of the home's value. Does anyone have experience with a cash-out mortgage in CH? Are the interest rates higher than traditional mortgages?

Thanks in advance for your answers and the wealth of information provided by the forum to date.

Dave

PS - I understand the temptation to post a response along the lines of "why don't you rent first, decide if you like CH, and then buy a house." For a number of reasons outside the scope of this thread, we are trying to avoid that option.
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Old 24.04.2019, 20:31
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Re: Another mortgage thread!

2. Yes, it does. You can pretty much forget getting a mortgage here with your American taint. Which sort of makes 1 irrelevant.

3. No idea what a cash out mortgage is so may not exist here.

Also understand that property mortgages are rarely paid off here; there's too much tax advantage in keeping them. It's changing slowly, but don't expect to pay off any mortgage you might be lucky enough to get.
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Old 24.04.2019, 22:11
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Re: Another mortgage thread!

Medea Fleecestealer, thank you for replying and most of all for not groaning.

2. Thanks also for confirming mortgages are subject to the US citizen black list. So, I'll be shopping mortgages only with those select few banks that do business with us.

3. A "cash out" mortgage is best explained as a loan where the bank takes a security interest in real estate and pays cash to the mortgagee (the homeowner). In my case, the purpose of the "cash out" would be to pay off a dollar-denominated short term loan that I had used to buy the CH house with cash. My question is whether cash-out mortgages exist in CH and whether the interest rates are appreciably higher than conventional mortgages.
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Old 24.04.2019, 22:43
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Re: Another mortgage thread!

I've never seen them mentioned, but you can check the various banks' websites and see if they exist here.

If you are lucky enough to be offered a mortgage they'll almost certainly want to see a permit at some point. The question will be whether they'll give you the mortgage and say show us the permit when you have it or whether they'll accept the permit approval letter. They might do either or neither, it just depends on the bank. May also depend on your actual wealth and how much you'd be putting into an account at said bank.
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Old 25.04.2019, 08:42
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Re: Another mortgage thread!

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Dave

PS - I understand the temptation to post a response along the lines of "why don't you rent first, decide if you like CH, and then buy a house." For a number of reasons outside the scope of this thread, we are trying to avoid that option.
At the risk of breaking your „rule“:

It is not possible not to rent - unless you‘d like to live in a hotel for a couple of years!

You can‘t get your residence permit until you are resident here. Unless there are special circumstances - like you being a multi-millionaire, you will not be able to just walk into Switzerland and get a mortgage. (And if you had that kind of money you wouldn‘t need a mortgage.)

I have lived here 30 years and owned 2 houses for 10 years each and lived in rented accommodation for the first 10 years.

The housing market simply does not exist here as you will understand it. Unless there are circumstances that you have not availed us of, it looks like you are putting the cart before the horse.

It took me 2 to 3 years to find a suitable property each time we moved...
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Old 25.04.2019, 11:35
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Re: Another mortgage thread!

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1. Is residence permit status controlled as part of the mortgage application process? (Meaning: do we need to wait for the B-Permit to arrive in the mail? Is the permit pre-approval letter from the cantonal migration authority sufficient?)
As well as the bank potentially putting up roadblocks given the US status your 'right to buy' will be triple checked by the notary in the district you want to buy in. They'll also make a judgement call on your suitability and will also want a ton of paperwork from you including a valid residency permit before any approval is given. It's not clear if you have German skills or not - if you don't then you also need to give POA to someone to sign on your behalf.

As Abfab highlighted demand here totally outstrips supply. It also took us approx 3 years to find a place to buy, having lost out on two places before that due to people having more money than sense and having seen over 500 properties either in person or online.

As you have probably have seen understanding the property market here takes a lot of patience and time. It's not clear how long you wish to stay but note that the market is designed to encourage you to stay and not flip your house two years down the line - check out the CGT aka 'Grundstückgewinnsteuer' tables from whichever Canton you're investigating.
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Old 25.04.2019, 13:35
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Re: Another mortgage thread!

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2. Yes, it does. You can pretty much forget getting a mortgage here with your American taint. Which sort of makes 1 irrelevant.

3. No idea what a cash out mortgage is so may not exist here.

Also understand that property mortgages are rarely paid off here; there's too much tax advantage in keeping them. It's changing slowly, but don't expect to pay off any mortgage you might be lucky enough to get.


Hi, there is a myth that Americans can't get a mortgage, I already addressed it in another thread a couple days ago.


So let me clear it up. I'm American. I have a mortgage.


As noted this did not come without some challenge - when I applied at the time only Credit Suisse and UBS (both Swiss banks) were offing me a mortgage. PostFinance did as well but this was the time they were responding to FATCA so they pulled back. Kantonal banks said no already to US citizens at the time as they didn't want to manage US regulations.


So if you want a mortgage, its Credit Suisse and UBS. There rates are coparible anyways to other banks, all hovering at around 1 percent these days. As noted in anohter thread, I just renewed a Tranch of my morgage, no issues. Point is, you can be US and you can get a mortage in CH, I'm not the only one. Know someone else in Kanton AG, like me, who is American and with mortgage.
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Old 25.04.2019, 14:23
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Re: Another mortgage thread!

I think a point to be made is, you are saying, I only want to buy, not to rent, and I'm not going to tell you why.

That is fair enough but most people here who know how the property system works in Switzerland are only trying to tell you that it is rarely done like that by newcomers. When things are rarely done, this might well be for a good reason.

So, how much do you know?

You may well find a mortgage as an American. I'd suggest this will be easier in an area of Switzerland that is more popular with expats... for example in Canton Zug. I'd get to know the advisors at one of these banks and set up a meet with them soon... they can answer a lot of your questions directly.

You should also look into deposit requirements, the fact that we here normally have two mortgages, one to be repaid and one that most people roll over, the kind of stress test that banks apply to see what you can afford not only in current circumstances but also if interest rates rise dramatically, the consequences on tax of implied rental income, the amount of tax you will have to pay if you sell the property in the first decade or more, the chance to deduct renovations from tax returns, what your tax implications will be, what are the implications for succession, and how the system may well be changing quite a bit in the next couple of years.

Those are the things off the top of my head.
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Old 25.04.2019, 14:24
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Re: Another mortgage thread!

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Hi, there is a myth that Americans can't get a mortgage, I already addressed it in another thread a couple days ago.


So let me clear it up. I'm American. I have a mortgage.


As noted this did not come without some challenge - when I applied at the time only Credit Suisse and UBS (both Swiss banks) were offing me a mortgage. PostFinance did as well but this was the time they were responding to FATCA so they pulled back. Kantonal banks said no already to US citizens at the time as they didn't want to manage US regulations.
But that was a mortgage for a place you live in yourself? And not a place you want to rent out?
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Old 25.04.2019, 22:35
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Re: Another mortgage thread!

Thanks, everyone, for the replies. Yes, I speak the Swabian dialect of German, which could be described as on the continuum between Hochdeutsch and the Swiss German spoken in the northern plain of CH.

We intend to stay in the house for a long time- years and years. The village in GR we are considering is one we visited a fair amount and indeed where some of my German ancestors lived for employment purposes in the 20th century. I know some of the properties we have been considering and have watched them on the market over the years. The market is not as tight as in the cities to the north, mainly because asking prices keep going up and homes linger on the market.

What I am wholly unfamiliar with is whether there is a required sequence for the steps of obtaining B-permit, applying for mortgage, and purchasing a home. My goal is to avoid moving our family several times (from our US home to a CH short-term rental to a CH home). It may be that the solution is for me to head to CH well ahead of my family and sort all this out in person...or start corresponding directly with banks and the migration authority. From the thread thus far, I get the impression I need to ask the banks (and insurance companies that issues mortgages) directly.

If anyone has experience with buying a home upon arrival in CH, I'd be interested in hearing the story of how it went. But, I understand why very few people do this. And, I do understand the relatively standardized tranche system, capital requirements, and income requirements for Swiss mortgages, as well as the (substantially positive) tax consequences of having a mortgage, subject to pending legislation that may alter the dance that is done involving imputed rental income and deducting mortgage interest and maintenance costs. Thank you, again, for your insight.
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