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  #21  
Old 27.04.2020, 15:05
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Re: Mortgage for Dummies: Basic Question

I recently had a very good experience with an morgage broker who collects offers from many different institutions based the data we submitted and then recomends a lender.

Pros: This broker was able to get us a better offer than we got through our own negotiations with our various banks. Actually, it was a fantastic offer.

Cons: However... this institution is paid by the LENDER (not by us). This sounds like a good thing as the service was 'free'. But I am very sceptical of financial service providers 'free' services. I worry they are more interested in getting you to buy products that offer the best commisions rather than the best product for you.

Because of the above, I am not going to advertise for them on the forum. If anyone is interested, send me a message and I'll respond to you with some details about our experience and give you the broker contact info. You can decide for yourself if you want to contact them.
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  #22  
Old 02.06.2020, 21:32
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Re: Mortgage for Dummies: Basic Question

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...And in many ways it's just like paying rent to the bank.

We are currently looking for buying a property, and I go through the different threads about this topic, finding useful info. Thank you!



I think ACE1 hit the point when one considers to buy a house:
You simply change your current house owner (from private, verwaltung etc.) to the bank (or other institute where you took the mortgage from).


There are advantages for doing so, which are mentioned in the rest of the thread, such as customizing your house according to your preferences etc.
Nevertheless, I really wonder if there is a REAL financial benefit from the deal?


Eventually, if there is no or minor % price increase in the property value, it means that I "parked" the money which I used of the down payment + paying back to the bank the interest.


so if my understanding is correct, the exercise of buying a house in CH, is basically to pay a monthly amount (like rent) in order to get better options for quality of living, namely more flexibility towards own preferences.
The downside, among others, is to be tight to a long term commitment.
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  #23  
Old 02.06.2020, 23:09
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Re: Mortgage for Dummies: Basic Question

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We are currently looking for buying a property, and I go through the different threads about this topic, finding useful info. Thank you!



I think ACE1 hit the point when one considers to buy a house:
You simply change your current house owner (from private, verwaltung etc.) to the bank (or other institute where you took the mortgage from).


There are advantages for doing so, which are mentioned in the rest of the thread, such as customizing your house according to your preferences etc.
Nevertheless, I really wonder if there is a REAL financial benefit from the deal?


Eventually, if there is no or minor % price increase in the property value, it means that I "parked" the money which I used of the down payment + paying back to the bank the interest.


so if my understanding is correct, the exercise of buying a house in CH, is basically to pay a monthly amount (like rent) in order to get better options for quality of living, namely more flexibility towards own preferences.
The downside, among others, is to be tight to a long term commitment.
Yes, if you buy a house purely from a financial gain standpoint, it’s a good summary.
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  #24  
Old 03.06.2020, 06:23
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Re: Mortgage for Dummies: Basic Question

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Hi HiggsBoson


Another tip, is to split your mortgage into separate chunks. Previously this was to be able to have separate mortgages with different interest rates and timescales.



Also Swiss mortgages normally don't allow capital repayment during the period of the mortgage.



Now with the interest rates being almost the same, you would have your mortgages for different timescales. The advantage of these chunks, could be able to have your mortgage with different banks, and when each mortgage expires, then you have the option of paying off some of the capital.


For example, 600,000 house, 200,000 cash + 400,000 mortgage
200,000 for 7 years ( num 1 )

100,000 for 5 years ( num 2 )

100,000 for 2 years ( num 3 )



After 2 years, ( num 3 ) expires repay 50,000
50,000 for 5 years ( num 4 )

After another 3 years, ( num 2 ) expires, repay 100,000
After another 2 years, ( num 1 and 4 ) expires, 250,000 remaining capital.
Start again ......



Good luck with your house hunting.

I like the idea. but in such case, the total interest rate and other costs will be higher due to the fact that Ill use different banks for different chunks of a loan. isn't it?
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  #25  
Old 03.06.2020, 07:39
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Re: Mortgage for Dummies: Basic Question

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In regards to this, can someone explain the advantage of buying a house? Since it seems that you never really own it, and if you move (assume that you cant rent it out for some reason), you have to sell it to pay back the mortgage.
Like the OP, i also come from a country were you pay off the full amount in 30 years.
If your a young single job hopper maybe it doesn't make sense. But when you get older and/or married and/or have kids then the options to job hop and move around will slowly but surely disappear.

When you get married you need to think about your partner, if your the only one working and your job takes you somewhere else, maybe you both move. But if your partner works, maybe it isn't so easy.

When you have kids it gets even more complicated. If they are young, then they can move schools, but the older they get the less feasible it becomes. if you want to move from French to German, you can imagine for them it truly is a nighmare. You have I would say until they are around 8 years old, beyond that it becomes difficult. By the time they are 11, you don't really have an option if you care about kids future, ou don't move.

As you get older the number of opportunites will slowly disappear too, job hoping is no longer an option, no you find a job and try and keep it.

As to paying it off... well that doesn't really make sense does it. I mean the house will be there long after your dead assuming it is well built and maintained. Why do we all need to pay for the place in full in your lifetimes, no pass it on to the kids.

As to the bank reassessing your income with your mortgage, never happened to me. A new mortage on a new property, yes. An existing mortgage that you've been paying for the past 20 years, no. The property assuming again it is maintained will have risen in value. My has doubled since I purchased it 20 years ago, but the morgage has remained the same. So you do the math. I payed 20%, down payment. I payed 15% amortization. I now pay interest only. But the property is worth 50% more.

On the other side of the coin my colleague John has alway rented, doesn't want to buy. He pays almost 2K a month in rent, money that is truly lost in my eyes. I pay 2K every 3 months if that I don't recall. The morgage is a fracton of what I pay in health insurance costs. So I have at least 16K a year more than john to spend. Why rent...
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Old 03.06.2020, 09:09
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Re: Mortgage for Dummies: Basic Question

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If your a young single job hopper maybe it doesn't make sense. But when you get older and/or married and/or have kids then the options to job hop and move around will slowly but surely disappear.

When you get married you need to think about your partner, if your the only one working and your job takes you somewhere else, maybe you both move. But if your partner works, maybe it isn't so easy.

When you have kids it gets even more complicated. If they are young, then they can move schools, but the older they get the less feasible it becomes. if you want to move from French to German, you can imagine for them it truly is a nighmare. You have I would say until they are around 8 years old, beyond that it becomes difficult. By the time they are 11, you don't really have an option if you care about kids future, ou don't move.

As you get older the number of opportunites will slowly disappear too, job hoping is no longer an option, no you find a job and try and keep it.

As to paying it off... well that doesn't really make sense does it. I mean the house will be there long after your dead assuming it is well built and maintained. Why do we all need to pay for the place in full in your lifetimes, no pass it on to the kids.

As to the bank reassessing your income with your mortgage, never happened to me. A new mortage on a new property, yes. An existing mortgage that you've been paying for the past 20 years, no. The property assuming again it is maintained will have risen in value. My has doubled since I purchased it 20 years ago, but the morgage has remained the same. So you do the math. I payed 20%, down payment. I payed 15% amortization. I now pay interest only. But the property is worth 50% more.

On the other side of the coin my colleague John has alway rented, doesn't want to buy. He pays almost 2K a month in rent, money that is truly lost in my eyes. I pay 2K every 3 months if that I don't recall. The morgage is a fracton of what I pay in health insurance costs. So I have at least 16K a year more than john to spend. Why rent...
A few points:
Property doesn't always go up in value. The last 20 years have had abnormally low interest rates. While they generally do go up in the long run, you can't guarantee this will be applicable to your own individual timeframe
Unless you are investing and getting a risk adjusted post tax return which is higher than your mortgage interest, it does make sense to pay off the mortgage.
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  #27  
Old 03.06.2020, 09:28
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Re: Mortgage for Dummies: Basic Question

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If your a young single job hopper maybe it doesn't make sense. But when you get older and/or married and/or have kids then the options to job hop and move around will slowly but surely disappear.

When you get married you need to think about your partner, if your the only one working and your job takes you somewhere else, maybe you both move. But if your partner works, maybe it isn't so easy.

When you have kids it gets even more complicated. If they are young, then they can move schools, but the older they get the less feasible it becomes. if you want to move from French to German, you can imagine for them it truly is a nighmare. You have I would say until they are around 8 years old, beyond that it becomes difficult. By the time they are 11, you don't really have an option if you care about kids future, ou don't move.

As you get older the number of opportunites will slowly disappear too, job hoping is no longer an option, no you find a job and try and keep it.

As to paying it off... well that doesn't really make sense does it. I mean the house will be there long after your dead assuming it is well built and maintained. Why do we all need to pay for the place in full in your lifetimes, no pass it on to the kids.

As to the bank reassessing your income with your mortgage, never happened to me. A new mortage on a new property, yes. An existing mortgage that you've been paying for the past 20 years, no. The property assuming again it is maintained will have risen in value. My has doubled since I purchased it 20 years ago, but the morgage has remained the same. So you do the math. I payed 20%, down payment. I payed 15% amortization. I now pay interest only. But the property is worth 50% more.

On the other side of the coin my colleague John has alway rented, doesn't want to buy. He pays almost 2K a month in rent, money that is truly lost in my eyes. I pay 2K every 3 months if that I don't recall. The morgage is a fracton of what I pay in health insurance costs. So I have at least 16K a year more than john to spend. Why rent...
But from the 16K that you save each year you are investing again in your home... renewing..repairing.. painting..
Maybe John does not have 20% parked and can use the cash for something else.

I have recently seen a bill of maintenance costs for a "Reihenhaus" which is for sale - approx 150.000 CHF spent during 15 years on maintenance only.
Apart from gardening (25000 CHF) just small repairs, fassade, heating, painting works, changing windows, new freezer, new refrigerator, new washing maschine, things like this. This means for me that the owner has spent on average 10.000 CHF a year just on maintenance.
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  #28  
Old 03.06.2020, 09:43
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Re: Mortgage for Dummies: Basic Question

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But from the 16K that you save each year you are investing again in your home... renewing..repairing.. painting..
Maybe John does not have 20% parked and can use the cash for something else.

I have recently seen a bill of maintenance costs for a "Reihenhaus" which is for sale - approx 150.000 CHF spent during 15 years on maintenance only.
Apart from gardening (25000 CHF) just small repairs, fassade, heating, painting works, changing windows, new freezer, new refrigerator, new washing maschine, things like this. This means for me that the owner has spent on average 10.000 CHF a year just on maintenance.
so considering this fairly extreme case, you're correct: 10,000 per year on maintenance. therefore tax deductible, so 8k a year in reality. vs 16k in rent. your still 50% up and your house is increasing in value as you have done 10,000CHF worth of renovation to it.
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  #29  
Old 03.06.2020, 10:22
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Re: Mortgage for Dummies: Basic Question

One should be aware that with a long-term mortgage there is a danger that selling up and moving out of the country and selling up will attract penalties. Banks claim they buy the loan for your mortgage on the market and expect you to pay them the balance if you don't take the mortgage to its full term.

I moved house within Switzerland and took my mortgage with me, but locking in 10 years or more with the potential of leaving the country could be expensive...
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Old 03.06.2020, 10:27
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Re: Mortgage for Dummies: Basic Question

got it.
I think it depends on the individual risk appetite

John: pays 8K more a year because he is paying rent. Spends 200K seeing the world.

Jack-Homeowner: pays let's say 200K now to secure the house, money which is parked until selling, pays 20-30K the notary public and all the other deeds for buying (depending on canton) and if selling when retiring pays another 20k notary again. If Jack keeps the property for 20 years and renews the hypo then there is also the risk of renewing the hypo with a higher interest rate, say 2% instead of 1% or whatever. Jack can offset this risk by saving even more money that he must not touch.
As a bonus Jack gets the amortisation.
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  #31  
Old 03.06.2020, 11:23
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Re: Mortgage for Dummies: Basic Question

You don't have to get a fixed rate mortgage. I have a libor mortgage, so the rate changes every 3 months. It has been kicking around the floor for the best part of a decade.

As long as they got nutcases like Trump in charge in the US I am confident the interest rate will continue to stay in the dumps. There talking about a depression now too. I am not saying it is good, far from it. But the interest rates aren't going anywhere, it is a good time to buy if you got the money and the security of a job you know is going to weather the storm.

If you leave the country you rent your place out. There is great rental market here, cause nobody can afford/wants to buy. Plenty of agencies happy to take a small margin and manage the transaction for you, find tenants, make sure things are kept working etc etc. Sure you got a lot of capital locked up in Switzerland, but whatever, it is one of the most stable places on the planet, no wars here for hundreds of years, few riots, civil unrest.

Cause if ultimately you plan to sell and move back to wherever you came from, maybe a different story. Although, wait, if you have kids and they grown up here, they won't want to move back to Timbuktu with you. They'll properly want stay here. It is complication that never occurred to me 20 years ago, indeed 10 years ago. But now my daughter is well into her teens and she quite open to the fact that she has no plans to leave Switzerland, ever; this is the best country in the world to live in. [yes, we got her a Suisse password too].
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Old 03.06.2020, 12:13
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Re: Mortgage for Dummies: Basic Question

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so considering this fairly extreme case, you're correct: 10,000 per year on maintenance. therefore tax deductible, so 8k a year in reality. vs 16k in rent. your still 50% up and your house is increasing in value as you have done 10,000CHF worth of renovation to it.
Well all you have done by renovation is reduce the depreciation on the building, Banks assume the building depreciates 1% a year.
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Old 03.06.2020, 12:14
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Re: Mortgage for Dummies: Basic Question

I am also looking around to buy a house... What I want is to be sure the place is mine no matter what. I am regularly fired as this is kind of the industry I am in (lots of outsourcing, moving abroad, startups failing etc etc).

I intend to buy using only pension fund and savings, no mortgage. Probably not the smartest thing to do but the place will be fully mine.

My concern is more, how to get the money partly out of the property once I retire (and on lower pension as its in the house). How to go in the grave 35 years from now with a big 0 in the bank (as i have no-one to leave inheritance to)?
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Old 03.06.2020, 12:16
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Re: Mortgage for Dummies: Basic Question

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got it.
I think it depends on the individual risk appetite

John: pays 8K more a year because he is paying rent. Spends 200K seeing the world.

Jack-Homeowner: pays let's say 200K now to secure the house, money which is parked until selling, pays 20-30K the notary public and all the other deeds for buying (depending on canton) and if selling when retiring pays another 20k notary again. If Jack keeps the property for 20 years and renews the hypo then there is also the risk of renewing the hypo with a higher interest rate, say 2% instead of 1% or whatever. Jack can offset this risk by saving even more money that he must not touch.
As a bonus Jack gets the amortisation.
Spend your money seeing the world, your mind is already made up and its what you will enjoy (or John will enjoy).

If you really do the calculation - right to the end - there are so many variables you can end up with financial ruin or multimillionaire success, and as said its a calculation of risk, like everything in life. I think whatever we argued as the positive effect of ownership your not going to agree so rent, buy some really fast cars and lots of designer watches. You'll love it.
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Old 03.06.2020, 12:18
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Re: Mortgage for Dummies: Basic Question

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Well all you have done by renovation is reduce the depreciation on the building, Banks assume the building depreciates 1% a year.
Show me a building built 50 years ago that is now worth 50% less than it was in 1970, even without any renovation.
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Old 03.06.2020, 12:35
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I am also looking around to buy a house... What I want is to be sure the place is mine no matter what. I am regularly fired as this is kind of the industry I am in (lots of outsourcing, moving abroad, startups failing etc etc).

I intend to buy using only pension fund and savings, no mortgage. Probably not the smartest thing to do but the place will be fully mine.

My concern is more, how to get the money partly out of the property once I retire (and on lower pension as its in the house). How to go in the grave 35 years from now with a big 0 in the bank (as i have no-one to leave inheritance to)?
It's only a state of mind! I have "owned" property since 1970. In your book none of them would be mine as they all had a mortgage. To me they all were mine.

If you don't put all your money into a property, you won't have such a bother getting it out!

With today's interest rates, not taking a mortgage seems daft. Borrow a million and at 1% pay CHF834 a month! You can then invest the money you didn't sink into a property elsewhere. The SMI up 1.42% this morning...
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Old 03.06.2020, 12:37
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Re: Mortgage for Dummies: Basic Question

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Show me a building built 50 years ago that is now worth 50% less than it was in 1970, even without any renovation.
Generally a 50 year old house would be on a bigger plot. Assuming it had zero renovations it would likely be knocked down & replaced by 2 houses. You are confusing the value of the Land with the value of the property. A plot with a crap house is worth less than an empty plot due to the cost of removal of said crap house. A full refurbishment will cost more than a new house.....
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Old 03.06.2020, 12:49
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Generally a 50 year old house would be on a bigger plot. Assuming it had zero renovations it would likely be knocked down & replaced by 2 houses. You are confusing the value of the Land with the value of the property. A plot with a crap house is worth less than an empty plot due to the cost of removal of said crap house. A full refurbishment will cost more than a new house.....
I agree, you are paying mainly for the land. So the 1% depreciation the banks are assuming. its 1% of the mortgage value or 1% of the house value ? Because the mortgage includes the land, in fact is mostly the land, and that isn't depreciating.
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Old 03.06.2020, 13:04
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Re: Mortgage for Dummies: Basic Question

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I agree, you are paying mainly for the land. So the 1% depreciation the banks are assuming. its 1% of the mortgage value or 1% of the house value ? Because the mortgage includes the land, in fact is mostly the land, and that isn't depreciating.
Valuation to be on the safe side. For info my parents replaced the windows & central heating in 2011 on what was then a 50 year old house, the repairs were 5 times the original purchase cost & that included the land!
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Old 03.06.2020, 13:09
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Re: Mortgage for Dummies: Basic Question

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Valuation to be on the safe side. For info my parents replaced the windows & central heating in 2011 on what was then a 50 year old house, the repairs were 5 times the original purchase cost & that included the land!
Yes so as I put earlier, it ends up being complex. If the bank is taking 1% of the valuation price, which is house and land, where (lets take a good guess) 1/3rd of the price is the house, they are in effect saying the house loses 3% of its value each year, i.e. in 30 years it would be worthless, while many components will last 30 years. This conversation can just go on forever there are so many variable outcomes.

Lets just agree renting is best but so is owning. then everyone is happy.
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Very Basic Question (But please reply) DJ82 Permits/visas/government 8 23.05.2008 12:44


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