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Old 04.03.2021, 10:45
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House purchase while on unemployment...

I'm going to contact a few banks, however, I wanted to inquire here if someone has had any experience with making a house purchase while between *work*. I have plenty of contributions to my pension thus far and saved cash also. Would they say fine, but you need to pay significantly more than the 20% down? Likely.. The house isn't very expensive, so this would not be an issue, to be honest.
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Old 04.03.2021, 10:51
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Re: House purchase while on unemployment...

If you need a mortgage, you will need a job.

Tom
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Old 04.03.2021, 11:03
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Re: House purchase while on unemployment...

You say between "work". If you already have a contract for the new job, that would probably be ok with the banks. If not, the above would apply.
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Old 04.03.2021, 15:37
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Re: House purchase while on unemployment...

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If you need a mortgage, you will need a job.

Tom
Or assets
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Old 04.03.2021, 15:43
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Re: House purchase while on unemployment...

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Or assets
To the extent that you don't need a mortgage.
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Old 04.03.2021, 16:33
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Re: House purchase while on unemployment...

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To the extent that you don't need a mortgage.
Ha, that's a good one.

My logic was paying more than usual into the property and see how they felt about that...
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Old 04.03.2021, 16:36
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Re: House purchase while on unemployment...

UBS will accept a signed employment contract starting in the future if your partner is working/acceptable salary etc. At least they did in the past but it depends on the relationship with the bank/advisor.
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Old 04.03.2021, 16:38
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Re: House purchase while on unemployment...

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Ha, that's a good one.

My logic was paying more than usual into the property and see how they felt about that...
Non status mortgages never took off in CH
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Old 04.03.2021, 16:39
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Re: House purchase while on unemployment...

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Ha, that's a good one.

My logic was paying more than usual into the property and see how they felt about that...
But he‘s right.

If you don‘t have passive income that covers the mortgage payments and you don‘t have employment income, how are you proposing to pay the quarterly interest, annual amortisation and any ongoing running and maintenance costs? Paying a chunk of this upfront is never going to fly. Additionally, banks have to do an affordability check that your income is 3x the cost of the mortgage amortisation, interest as if it were at 5% regardless of the rate you pay and 1% of the property cost as depreciation. In general terms that means you need an annual income of at least 20% of the property price (assuming 20% deposit).
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Old 04.03.2021, 17:05
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Re: House purchase while on unemployment...

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Additionally, banks have to do an affordability check that your income is 3x the cost of the mortgage amortisation, interest as if it were at 5% regardless of the rate you pay and 1% of the property cost as depreciation. In general terms that means you need an annual income of at least 20% of the property price (assuming 20% deposit).
Not quite correct; the amortisation would surely be done on the amount of the mortgage, not the whole purchase price, and the income can include theoretical rental income on the property (or parts thereof). Even with all that, I don't think it's a hard and fast rule, more of a guideline starting point.

Pretty sure our current mortgage, taken out in 2018, would not actually fit into that equation, but there are other things like other (non-mortgaged) property owned, value of investments etc. etc. that would have been taken into consideration. The fact that if we liquidated other assets we could pay the mortgage off in full was probably relevant as well.
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Old 04.03.2021, 17:34
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Re: House purchase while on unemployment...

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Not quite correct; the amortisation would surely be done on the amount of the mortgage, not the whole purchase price, and the income can include theoretical rental income on the property (or parts thereof). Even with all that, I don't think it's a hard and fast rule, more of a guideline starting point.

Pretty sure our current mortgage, taken out in 2018, would not actually fit into that equation, but there are other things like other (non-mortgaged) property owned, value of investments etc. etc. that would have been taken into consideration. The fact that if we liquidated other assets we could pay the mortgage off in full was probably relevant as well.
As I said generally (and based on a 20% deposit for owner occupied property)...

The amortisation is done on the property value, not the mortgage value and is generally 1% per year for 15 years to get from an 80% LTV to 65%.

Even if it were the mortgage value being used, sticking with the 20% deposit, that would mean 0.8% of the property value.

If you start talking about rental income, then we move into a different topic. The OP has made no mention of buying as an investment.
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Old 04.03.2021, 17:46
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Re: House purchase while on unemployment...

SGKB use (or did use) different numbers, although the same principle for affordability calculation.

5% "worst case" interest rate
0.7% of property cost as maintenance cost
66.5% first mortgage --> 13.5% amortizable over 15 years (assuming 20% deposit, otherwise less)

Total of that lot should not exceed 1/3 of gross income.

It is fine to be between jobs or moving jobs as long as you have a signed contract for the next one; obviously the income check will be based on the new job.
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Old 04.03.2021, 18:42
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Re: House purchase while on unemployment...

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As I said generally (and based on a 20% deposit for owner occupied property)...
Sure, I was just pointing out that while your "in general" rule might be a good starting point, lots of other factors can come into play, so one shouldn't treat it as a definitive, nor indeed (seeing NtS's post) general across all banks (or time) statement of requirements.

The OP doesn't give any details, but it's entirely possible that he has a significant amount of capital and wants the mortgage for tax-efficiency reasons, for example. Not likely, perhaps, given the question, but I think it's worth pointing out that the link between actual earnings and mortgage eligibility is not set in stone, which one might infer from your, and others', posts.
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Old 04.03.2021, 20:27
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Re: House purchase while on unemployment...

We did 315k mortgage on 465k property, in order to have only the primary (interest only) mortgage.

Rustico was 90k cash.

Tom
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Old 04.03.2021, 23:12
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Re: House purchase while on unemployment...

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To the extent that you don't need a mortgage.
Right, but you may want one nevertheless for whatever reason.
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Old 10.03.2021, 09:02
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Re: House purchase while on unemployment...

So I'm a bit wiser after making a trip to the bank. So the mortgage is out, I felt even if I asked for a 1chf one, they could not offer it.

So, I've just realized I can use my pensions and Piller 3a contributions also, so my position is even better than I thought. I should be able to easily afford a nice 4.5 apartment now.

I presume withdrawing the pensions to buy property, even without a mortgage, should not be an issue? I realize there is a tax hit on that also.

The prospect of having no mortgage is attractive, to say the least... At least for the next few years.
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Old 10.03.2021, 09:08
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Re: House purchase while on unemployment...

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I presume withdrawing the pensions to buy property, even without a mortgage, should not be an issue?
But only 10% of the purchase price max.

Tom
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Old 10.03.2021, 18:51
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Re: House purchase while on unemployment...

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But only 10% of the purchase price max.

Tom
Good point, tks for the reminder...
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Old 10.03.2021, 18:55
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Re: House purchase while on unemployment...

We bought an apartment in Zürich and we just made the loan as I did not have a fix job, just temporary one. My gf did so that helped. So with no job in Zürich I don’t think it’s possible to be honest...
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Old 10.03.2021, 19:02
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Re: House purchase while on unemployment...

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But only 10% of the purchase price max.

Tom
Not true. I took our more than 10% of the purchase price from my pension.

10% is the amount that you need to put in of your own non-pension funds. I‘m not aware of there being an upper amount on how much pension you can use, but the withdrawal tax on a big lump sum will be noticeable.
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