I am a total noob about credits, so posting here in case I am missing something big about no-amortization loans.


If my current rent is equal to my future interest payment, and I don't have a reason to expect house prices will go up more than gold, what's the benefit of taking no-amortization loan?


I know there is some tax deduction for interest payment, but is that all?

The main benefit is that for most people, without a loan, they can't buy a house. The perceived benefits of buying a house vary from person to person.

You've missed the additional cost of imputed rent. That's a notional amount added to your income for tax purposes.

But my current interest is way lower than what I'd be paying in rent for the same property. When interest rates go up, rents go up. So it's highly unlikely your interest payments will be the same as your rent.

Anyway - buying a house in Switzerland as an investment is not really that good. You need to hold on to it for at least 20 years, and even then you'll pay capitals gains on the profits of the sale.

__________________
Down with racism. Long live miscegenation!

This is very interesting. Should I expect the rent for my apartment to go up next year?

Did your rent go up in period 2000 - 2010? Thanks


A note: if rents go up due to interest rate hikes, interest rate hikes go up due to inflation, and rents are a big part of inflation, do we all starve at the end?

Indeed, ours is 1/4 of the rent.

Tom

This could be due to two reasons (listing them here so you can point me to errors in my reasoning):
1) the principal is small, good for you.

2) the rate you got was small. My understanding is the best you can get is 10 years fixed rate, meaning that in a several years your new loan will have a higher rate so "1/4" is only a temporary benefit. I am not saying it's not a good thing, just want to make sure I got it right.

Thanks

It’s an emotional decision not a financial one. If it was a pure financial decision people would not do it.

Maybe of interest to you (might be paywall):


https://www.tagesanzeiger.ch/warum-e...t-564841165921

https://www.tagesanzeiger.ch/was-der...t-502314272936

I'm on an 8-year fixed interest-only mortgage at 0.82% - work out what how much you'd like to borrow at that rate. That's CHF684.- per month for CHF1 million.

Next question?

Sadly the boat has sailed (for the moment) on such cheap loans...

You can't compare rent and mortgage payments directly. A house costs more than just the mortgage. Heating oil, rubbish removal fees, property (and other) taxes, renovations and more.

While if you rent, you pay rent plus utilities, and you're done.

Also, the obvious advantage of not paying back the mortgage is, well, not needing to pay it back. You pay less every month, or you can buy a bigger house with the same amount of money.

And if you pay back the mortgage, your wealth taxes will rise. So you pay either to the bank or to the taxman, there's no way out. Depending on what the tax rate is, where you live, that can be a little more or a little less, but at the current interest rates, paying to the bank is likely cheaper.

Heating oil and rubbish are paid also if you rent.

Tom

We just bought a house that is 20 years old from the original owners, at around 3 times what they originally paid for it. They can effectively delay the capital gain with the new property they have bought (as long as it is equal to or more that the sale price of the current house).

Even if they do pay capital gains tax, they walk away with more than what they would if they had rented those 20 years.

Of course. Just saying you have to factor it in.

Possibly. If interest rates fall, rents can also be reduced.
I rented for five years at a fixed agreed rent. Then I bought a house.
No. Because with inflation you've good grounds for a wage increase.

Current fixed rate 10 year is about 3%. With a 1M mortgage, that'll be 2500 a month. Good luck finding a property worth 1.2M or so that's got a rent that low.

You also need to know that without a very hefty deposit, you will have to amortise part of the mortgage. When I switch to unamortisation, it needed approval from a senior bank bod.

Other costs - maintenance, renovation...

__________________
Down with racism. Long live miscegenation!

This is impossible, unless you pay off your Mortgage with undeclared assest.

Paying off is not adding to your assets, it’s transferring some of your assets to the lender…

Or money that you haven't earned and spent yet.

Example: next year, I get 100k bonus. if I pay it towars my mortgage, my assets go up. If I blow it on coke and hookers, my assets stay the same.

Example #2: likewise, but rather than coke and hookers, motorcycles.

Tom

Either way, you'll pay income tax on the bonus...

Buying isn't just a financial one, but its a big part.

if you have the money in the bank then buying a property is making use of it, leaving it in the bank isn't.

Sure, you have other expenses; so comparing rent to mortgage payments isn't correct, but well, if it wasn't financially interesting nobody with money would buy property in Switzerland.

But it is a responsibility...

That said, be careful...my neighbour wanted to sell a property he built after just two years, his circumstances changed. It took almost ten years to find a buyer at which point I think he sold it for the same amount he paid for it. Did he lose money, I don't think so. He ended up renting it out, the rent surely paying the mortgage; with next to no maintenance in a new house...but he had what at least half a million I would guess tied up in it.

Thank you for the comment. I entirely agree with you.

As mentioned its also emotional decision. We wanted some stability for our kids, not moving every X years around which is always multi-month stressful experience without any clue how good/bad next place will be.

Rents I/we always used were without exception OK at best. Place you own, you decorate and change to your wishes and needs. Any big work can (and should) be deducted from your taxes, cutting off some 45% of the costs.

Ie we recently took 90% mortgage at UBS and took some 2nd pillar pledge for it, its again tax beneficial to pay it back (those 45% shaving off the top taxation brackets). Renting similar place would cost more even with current rates.

Changing floors, lights, later kitchen, maybe adding wood stove or sauna is not something you would do (nor expect) in most rentals, and if yes at very premium costs. If you own, you invest into your own property and increase its value (colleague paid 70-80k for pool for his house, the price went up by good 300k on the market, although this is an extreme example).

Unless there is something very unattractive about a property, you will struggle not to find a buyer in today's market, especially if it is located anywhere near a major centre like Zurich or Zug.