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-   -   Should I buy a home or invest? I just reached 200k in savings and they are sitting in (https://www.englishforum.ch/finance-banking-taxation/297835-should-i-buy-home-invest-i-just-reached-200k-savings-they-sitting.html)

ticinoLove 27.04.2020 16:16

Should I buy a home or invest? I just reached 200k in savings and they are sitting in
 
Hello, I really need some advice, from different prospectives, on what would be the best way to use my money?

First of all some informations:

-30 years old male
-single
-job in IT (management position, solid company and no foreseeable risk in losing my job)
-making 90k a year
-no debts
-no car (I move with the Train and I got a big scooter for when I need to move, if needed I borrow the car from parents)
-living in rented appartment

I live in Ticino and I have NO plans to move.
I'm confident I will always have/find a job in Ticino.

For that reason, I'm considering one of the following scenarios:

-Buy a house
-Invest heavily my money

I just reached with my last salary, I reached 200k CHF in savings.

Of those, 90% is sitting in my Bank Account and 10% is invested in Crypto.

In the last years I was so busy with life, making a career, that I just left the money there.

Now I want to do something with it and I m seeking advice!

First idea is, would it make sense to buy a house? I'm sure I'll always live in Ticino, currently I'm paying 2'000 CHF per month just to rent.
Even if in the future I switch work place, Ticino is fairly small that I can commute anywhere without issue.
I have the capital to put 20% for a 1million house.
And with the current Interest rates I would probably pay less monthly for the mortgage interests (if I buy a house, I plan to just amortize until only the first mortgage is left (67% of total house value), and then just pay interest for the rest of my life (tax benefits).
So this seems a good idea to me, especially because sooner or later I'll want to start a family and for sure I'll need a bigger place!

The other option is to keep renting and invest heavily all that money, but also here I'm clueless, what is my best option in this case? Would it make sense to invest over buying a property?



Thank you

Phil_MCR 27.04.2020 16:29

Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin
 
can you get a decent house for < 1 million??

Guest 27.04.2020 16:52

Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin
 
oh yes- just depends where

Guest 27.04.2020 17:27

Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin
 
Quote:

Originally Posted by ticinoLove (Post 3176227)
-making 90k a year

I reached 200k CHF in savings.

I have the capital to put 20% for a 1million house.

I took these 3 things out of your post.

You might have the 200K to put down, you however have nowhere near an income that would allow an 800K mortgage. I'd guess you can do half of that max (and don't forget the extra costs involved with buying) putting you in the market for houses of around 600K max.

Often people do forget that even tho they have the downpayment, they just lack the income for the loan.

I'd say forget about it for now.

gata 27.04.2020 17:43

Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin
 
Quote:

I took these 3 things out of your post.

You might have the 200K to put down, you however have nowhere near an income that would allow an 800K mortgage. I'd guess you can do half of that max (and don't forget the extra costs involved with buying) putting you in the market for houses of around 600K max.

Often people do forget that even tho they have the downpayment, they just lack the income for the loan.

I'd say forget about it for now.
Can you explain this a bit more please? What income you must have to get a mortgage for a house like that?

As long as the mortgage is less than 2K a month it should be fine, right?

gipfelisturmer 27.04.2020 17:49

Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin
 
I think that you should:
1. Find a cheaper place to live than 2000CHF/month (or is Ticino really that expensive? :O)
2. Invest
3. Buy a home (if it will make financial sense) when you will need it for your family, not on a tentative plan of starting one "sooner or later"
(e.g. you might change your mind about moving in 2 years - be it work or whatever; your future wife might not like the house; you might together decide to go somewhere else etc. etc.)

ticinoLove 27.04.2020 17:53

Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin
 
Quote:

Originally Posted by Phil_MCR (Post 3176230)
can you get a decent house for < 1 million??

in Kanton Ticino there are nice house with less than 5 years since they have been built, around that price point!

Guest 27.04.2020 17:57

Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin
 
Quote:

Originally Posted by gata (Post 3176251)
Can you explain this a bit more please? What income you must have to get a mortgage for a house like that?

As long as the mortgage is less than 2K a month it should be fine, right?

euh nope.

Bank also has to reserve amounts of your income for maintenance of the house, living, also they don't calculate with the current interest for a maximum loan amount but calculate with like 5% interest to be certain one can handle the payments on the long term.

For the 1M house he'd need an income which is at like Double of what he has now.

Jaceq 27.04.2020 17:57

Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin
 
Quote:

Originally Posted by gata (Post 3176251)
Can you explain this a bit more please? What income you must have to get a mortgage for a house like that?

As long as the mortgage is less than 2K a month it should be fine, right?


Nope, have a look at this calculator:
https://www.moneyland.ch/en/mortgage-calculator


If you put in following data:
1mil cost of house
200k downpayment
90k gross income


Basically income is too low to be in 'safe' - below 33% in this calculation. Also, please note that (if I remember correctly) affordability calculations are done for interest rate of 5% (and that is by law)


Another thing is, in 'region Lugano' on homegate (whatever that means) there are houses starting from 70k (almost a ruin), for 200k in some viliges in 'region' you can buy a house that is ready to move in...

So let's not assume 1mil is needed, maybe OP can find something really much, much cheaper, and if he does, he might be able to actually afford easily (basically up to almost 600 000 with data provided by him is possible)

BasP72 27.04.2020 18:19

Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin
 
Is it such a good time now to buy a house ? Is there a bubble going on ? What will the fallout of the coronavirus do with house prices ?

Cherub 27.04.2020 18:30

Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin
 
2000 francs a month seems very expensive for Ticino. Friends of ours moved there in January 2019 and it is much cheaper to rent a place than in Basel.

LifeStrain 27.04.2020 18:45

Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin
 
How did you manage to save 200k, while paying 2k rent with this salary? Did you work since you were 18?:confused: I am struggling to save more than 20-30k per year here, even with somewhat higher salary.

LuganoPirate 27.04.2020 19:14

Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin
 
It depends where you live, so CHF2,000 is not unreasonable for Lugano. We have flats we rent for CHF2,500 a month and I know plenty going for CHF1,850 and more. Not that it's anyone else's business, but from what you say i can see how you could have saved 200k.

Assuming you invest CHF180,000 (you'll need +- CHF20k for legal fees, taxes etc) of your own capital, and with your salary you could buy something for about CHF 650,000

Assuming a mortgage of CHF 480,000 locked in for 10 years you'd pay about CHF 5,000 a year depending on the interest rate. On top if you have 100 mē you could pay between CHF 3 and 4,000 a month in maintenance charges. Again depending on where you buy. If you buy a house you'll not have this charge but you will have other expenses.

Your bank interest is tax deductible while your rent is not, though you will have some extra taxes to pay as a house owner, but this will be quite small. So you are definitely better of buying - and it's yours. If it's too small later on, you can then rent it our for a nice income.

As to the property market, yes prices may go down in the short term, but if you're in for the long term you don't need to worry.

Otherwise you could invest in equities. If you do now is probably the time to buy, though the markets could tumble again so maybe just invest half. If Swiss shares you've missed the main dividend season and your average yield is about 2.5 - 3% depending on what you buy. At 3% that would give CHF6,000 less tax, but of course that excludes any potential capital gains.

If it were me, and that's all I had, I'd definitely go the property route and if you need some advice as you're in Ticino feel free to PM me.

ticinoLove 27.04.2020 19:18

Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin
 
Quote:

Originally Posted by dbucar (Post 3176254)
I think that you should:
1. Find a cheaper place to live than 2000CHF/month (or is Ticino really that expensive? :O)
2. Invest
3. Buy a home (if it will make financial sense) when you will need it for your family, not on a tentative plan of starting one "sooner or later"
(e.g. you might change your mind about moving in 2 years - be it work or whatever; your future wife might not like the house; you might together decide to go somewhere else etc. etc.)

about point 1), I can for sure find cheaper places, but I don't have any particular "vice" or special expenses like cars or expensive hobbies,
the one thing I LOVE, is having a nice place to live!
I lived for years in low cost apartments to save as much as possible, and now my main goal is to get a nice place.

about point 3) when I talk about buying a house, I don't plan on buying mid-range/older houses, and for around 1 million you can get very nice houses!
And I won't be moving from Ticino for sure, I've got family and friends here.

So sometimes I just feel I'm throwing away 2k per month, when I could just use my savings and get a house, where I would pay the same amount until I get to 65% of the mortgage,
then I would pay around 1k per month!

finally, about point 2) I would love to invest, but not sure what s the best way to do this, is there a Topic on this forum with all the informations needed to invest in CH?
What are the best tools? I would avoid wealth management and investing by Banks, as I assume they take a nice cut.

ticinoLove 27.04.2020 19:43

Quote:

Originally Posted by Cherub (Post 3176289)
2000 francs a month seems very expensive for Ticino. Friends of ours moved there in January 2019 and it is much cheaper to rent a place than in Basel.

as I answered to someone else:

"I can for sure find cheaper places, but I don't have any particular "vice" or special expenses like cars or expensive hobbies,
the one thing I LOVE, is having a nice place to live!
I lived for years in low cost apartments to save as much as possible, and now my main goal is to get a nice place."

so I can find a cheaper place, but as having a nice house/apartment (modern, latest technologies) is a MUST as I saved so long for being able to live a nice place! I just don't know if it 's best to rent and invest my capital, or buy!

Quote:

Originally Posted by LuganoPirate (Post 3176324)
It depends where you live, so CHF2,000 is not unreasonable for Lugano. We have flats we rent for CHF2,500 a month and I know plenty going for CHF1,850 and more. Not that it's anyone else's business, but from what you say i can see how you could have saved 200k.

Assuming you invest CHF180,000 (you'll need +- CHF20k for legal fees, taxes etc) of your own capital, and with your salary you could buy something for about CHF 650,000

Assuming a mortgage of CHF 480,000 locked in for 10 years you'd pay about CHF 5,000 a year depending on the interest rate. On top if you have 100 mē you could pay between CHF 3 and 4,000 a month in maintenance charges. Again depending on where you buy. If you buy a house you'll not have this charge but you will have other expenses.

Your bank interest is tax deductible while your rent is not, though you will have some extra taxes to pay as a house owner, but this will be quite small. So you are definitely better of buying - and it's yours. If it's too small later on, you can then rent it our for a nice income.

As to the property market, yes prices may go down in the short term, but if you're in for the long term you don't need to worry.

Otherwise you could invest in equities. If you do now is probably the time to buy, though the markets could tumble again so maybe just invest half. If Swiss shares you've missed the main dividend season and your average yield is about 2.5 - 3% depending on what you buy. At 3% that would give CHF6,000 less tax, but of course that excludes any potential capital gains.

If it were me, and that's all I had, I'd definitely go the property route and if you need some advice as you're in Ticino feel free to PM me.

Thank you for your answer!

Yes, in Lugano to be honest is hard to find a DECENT place (at least 3.5 locals) for less than 1600-1700 CHF per month.

And my savings come mainly to having a nice pay for ticino (90k yearly without counting bonuses is not bad for Ticino, where all my friends are more towards 70-80k, even in some banks), and I lived with my parents as much as I could and saved every cent, never bought a car, and had some bitcoins from early on (tho I dont like to invest in crypto, I just left a small part there which I will never touch).

But I can also tell you right now, I won't be buying a 600-700K house, as there is no way I can find for that price a brand new house, with at least 120square meters of surface, and with a garden (a must if I buy a house).
Because in my mind, if I buy, I need to buy something I LOVE and I saw some nice places with prices around 1million.

The area must be between Lugano and Bellinzona, so I'm in the middle, in case I change work place in the future.

Finally, I never thought about building from scratch, how hard is that? and how expensive?
Let's say I rent until I find a nice piece of land, how much is it more expensive to buy land + build house, compared to buying straight the house? (assuming for the sake of the example, that both houses are similiar and in the same area).

Quote:

Originally Posted by LifeStrain (Post 3176300)
How did you manage to save 200k, while paying 2k rent with this salary? Did you work since you were 18?:confused: I am struggling to save more than 20-30k per year here, even with somewhat higher salary.

stayed with my parents as long as I could, I saved on everything, never bought a car, no designer clothes and so on, it wasnt hard to save 40k per year to be honest when you are just paying Insurance and food and taxes.

But I did it for a reason, I knew I could live with my parents for 3more years, so I made the best out of it.

Now I don't wanna keep saving so hard, but I want to start living, and for that I dream about having a great place to stay, that s the main reason I saved until I could!

Quote:

Originally Posted by BasP72 (Post 3176281)
Is it such a good time now to buy a house ? Is there a bubble going on ? What will the fallout of the coronavirus do with house prices ?

Of course I don't intend buying right now, it will take at least the full year to look at properties and how the market responds to coronavirus, but maybe start of the next year it could be a good moment if things are going nicely

Jim2007 27.04.2020 20:02

Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin
 
Quote:

Originally Posted by ticinoLove (Post 3176227)
I'm confident I will always have/find a job in Ticino.

I remember that! Four of us worked in IT, we thought the same, now at 54 - 60, none of us have worked in a few years... If we had not worked as contractors in the late 80s and 90s and had a chance to build up good reserves, we'd be in difficulty now.

Find a cheaper place to live and build up your reserves for the day, you will not have a job or you get tired of it and want to get out early or are forced out.

me.anon 27.04.2020 20:17

Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin
 
Quote:

Originally Posted by Jim2007 (Post 3176341)
. . .
Find a cheaper place to live and build up your reserves for the day, you will not have a job or you get tired of it and want to get out early or are forced out.

That is precisely the same advice I would give.
Disclaimer: I am not status conscious and neither, fortunately, is my wife.

eyebeebe 27.04.2020 20:59

Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin
 
Quote:

Originally Posted by ticinoLove (Post 3176332)

But I can also tell you right now, I won't be buying a 600-700K house, as there is no way I can find for that price a brand new house, with at least 120square meters of surface, and with a garden (a must if I buy a house).
Because in my mind, if I buy, I need to buy something I LOVE and I saw some nice places with prices around 1million.

As said above you have a lot more saving to do. Using the Moneyland calculator linked, with a salary of CHF 90k, you will need a deposit of CHF 610k, to buy a CHF 1m house. On the plus side though, when you get there, the mortgage interest will only be about CHF 4k per year.

lost_inbroad 27.04.2020 23:08

Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin
 
Purchase a cheaper duplex, rent out one unit and build a second source of income.

wantone 28.04.2020 09:06

Re: Should I buy a home or invest? I just reached 200k in savings and they are sittin
 
Quote:

Originally Posted by ticinoLove (Post 3176325)
about point 1), I can for sure find cheaper places, but I don't have any particular "vice" or special expenses like cars or expensive hobbies,
the one thing I LOVE, is having a nice place to live!
I lived for years in low cost apartments to save as much as possible, and now my main goal is to get a nice place.

about point 3) when I talk about buying a house, I don't plan on buying mid-range/older houses, and for around 1 million you can get very nice houses!
And I won't be moving from Ticino for sure, I've got family and friends here.

So sometimes I just feel I'm throwing away 2k per month, when I could just use my savings and get a house, where I would pay the same amount until I get to 65% of the mortgage,
then I would pay around 1k per month!

finally, about point 2) I would love to invest, but not sure what s the best way to do this, is there a Topic on this forum with all the informations needed to invest in CH?
What are the best tools? I would avoid wealth management and investing by Banks, as I assume they take a nice cut.

Interactive Brokers account for investing and just a simple strategy with some stocks. However, I would buy the house in your case if you can afford the mortgage.


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