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Old 19.07.2011, 15:35
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Re: Buying a house, getting the 20%

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As has been mentioned many times on here - the Swiss housing market is different to the rest of the western world.

The Swiss buy a house - live in it - die in it - will it to their children - who either renovate it and live in it - or sell it!!

m3 for m3 there is very little difference in a new house to one that is renovated to new house standards.

Interest rates are set to rise in Switzerland - with the base rate possible heading as high as 6%. The SNB is worried about the amount of mortgage lending, especially away from CS/UBS/Kantonal, where the 80/20 rule is being applied in a very flexible way. The SNB will not tolerate a property market collapse - and will do everything it can to ensure the steady market rise is maintained (in line with inflation).

I'd be very cautious about overstretching to get on the property ladder in Switzerland.
Not sure where you got that from, but I would say that is extremely unlikely. The SNB has to balance problems with the property market due to cheap mortgages against problems with the export industry due to the CHF being too expensive. Given the failed attempt last year to control the rise of CHF vs EUR, I would not expect to see interest rates rise for another year or two at least, and even then it seems unlikely that things will have stabilised enough to see rates rising to 6% in the medium term.

The markets agree with this outlook - just look how cheap it it is to fix for 5 or even 10 years at the moment (2.8% for 10Y with PostFinance). If there was any real risk of interest rates touching 6% any time soon, you would be pretty unlikely to see these kind of low fixed rates for such long periods.
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  #22  
Old 19.07.2011, 15:37
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Re: Buying a house, getting the 20%

Also the bank will calculate your likeliness of getting the loan on 5% in the case interest rates go up again
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Old 19.07.2011, 16:03
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Re: Buying a house, getting the 20%

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On the other side of the coin, my neighbour has just sold their flat after three years for 400,000CHF more than they paid for it.

Okay, they had to take the 40% hit on the profit as they're leaving the country but that still leaves a nice wad of profit that they wouldn't have got if they were renting.
Long may that continue. Or at least til the day after I sell my flat
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Old 19.07.2011, 16:38
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Re: Buying a house, getting the 20%

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Not sure where you got that from, but I would say that is extremely unlikely. The SNB has to balance problems with the property market due to cheap mortgages against problems with the export industry due to the CHF being too expensive. Given the failed attempt last year to control the rise of CHF vs EUR, I would not expect to see interest rates rise for another year or two at least, and even then it seems unlikely that things will have stabilised enough to see rates rising to 6% in the medium term.

The markets agree with this outlook - just look how cheap it it is to fix for 5 or even 10 years at the moment (2.8% for 10Y with PostFinance). If there was any real risk of interest rates touching 6% any time soon, you would be pretty unlikely to see these kind of low fixed rates for such long periods.

Also 6% looks unlikely historically - look at the last 150 years

Last edited by marton; 08.12.2017 at 18:37.
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Old 19.07.2011, 17:29
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Re: Buying a house, getting the 20%

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Also 6% looks unlikely historically - look at the last 150 years

That is a very useful chart - thanks for posting!

I have a question regarding terms on 1st and 2nd hypothek. Do people usually have them running at different terms to hedge against changes in the interest rate, or with the rates so low right now, does it make more sense to lock everything in at 1st hypothek at 1.85% and 2nd =.5% higher or 2.35%?

Sorry if I should start a new thread for this...
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Old 19.07.2011, 17:34
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Re: Buying a house, getting the 20%

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Also 6% looks unlikely historically - look at the last 150 years
Well, I reckon you should do your calculations with the 5% scenario in view, i.e. can you still afford it if it's 5%. We got 2.95 for ten years out of UBS in May (wish we could have waited until the last minute but things kept going up and down then, so I seized a "down" day), now it's even lower, the problem is, of course, that the price for houses goes up conversely. And clearly people are prepared to pay crazy prices for both rent and purchase, I mean, 2800 for a flat in LENZBURG? When did that happen?
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Old 19.07.2011, 17:50
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Re: Buying a house, getting the 20%

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The problem is, i could save for years to get the deposit, but during these years i am paying rent which technically i could be saving.

My finances are financially stable, but saving up 100'000 is a lot to ask alongside paying a rent in a nice appartment. Financially, i would be better off doing it this way and it makes sense to me, but getting that cash is the only problem.

Maybe these "Sofort Kredit" firms may do it, but at a much higher rate, may still be worthwhile looking into as i see no disadvantages at all as long as i can keep up with payments.

Other option is Miet/Kauf, but i very rarely see them advertised
You saying you're paying 2800 CHF in Lenzburg? That sounds like a lot of money to me. Fair in Zürich or Basel maybe in an upmarket location. But Lenzburg? I guess you've really spoilt yourself and are living in the lap of luxury. But maybe if you want to save up you could consider downgrading now to have more a couple of years down the road? I don't know how big your family is or how many rooms you need. But a friend of mine has a three room place in Niederlenz for about 800. Just imagine how much you could be stashing into your socking every month, every year. You'd have saved the cash you need in under 5 years.
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Old 19.07.2011, 17:53
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Re: Buying a house, getting the 20%

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Also 6% looks unlikely historically - look at the last 150 years
by the same token, you could say that less than 3.5% looks unlikely historically, yet here we are...
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Old 19.07.2011, 17:56
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Re: Buying a house, getting the 20%

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Well, I reckon you should do your calculations with the 5% scenario in view, i.e. can you still afford it if it's 5%. We got 2.95 for ten years out of UBS in May (wish we could have waited until the last minute but things kept going up and down then, so I seized a "down" day), now it's even lower, the problem is, of course, that the price for houses goes up conversely. And clearly people are prepared to pay crazy prices for both rent and purchase, I mean, 2800 for a flat in LENZBURG? When did that happen?
Dont be mean to Lenzburg, I happen to live very close, and sure its probably the boring mid sized city in all of europe but its a nice place.
(I hear there is a great Celtic bar tucked away there though)
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Old 19.07.2011, 17:59
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Re: Buying a house, getting the 20%

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The problem is, i could save for years to get the deposit, but during these years i am paying rent which technically i could be saving.
That's not the way to be looking at it.
During those years you aren't commiting your own capital, you are living debt-free and with the world hopefully coming out of a recession at some point during that period, you could be making a killing if you invest wisely.
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Old 19.07.2011, 18:14
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Re: Buying a house, getting the 20%

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Well, I reckon you should do your calculations with the 5% scenario in view, i.e. can you still afford it if it's 5%. We got 2.95 for ten years out of UBS in May (wish we could have waited until the last minute but things kept going up and down then, so I seized a "down" day), now it's even lower, the problem is, of course, that the price for houses goes up conversely. And clearly people are prepared to pay crazy prices for both rent and purchase, I mean, 2800 for a flat in LENZBURG? When did that happen?

Curious as to why you decided to lock it for 10 years? I can understand the reasons when thinking that the rates will rise (really can't go lower!), but with 1 and 2 year rates at sub 2%, do you think that rates will rise above 3% in the next year or 2 justifying locking in the 2.95% 10 year term? Also, is that for 1. and 2. Hypothek? Where we are looking, the 2nd Hypothek is 0.5% higher than the first. We are considering taking a 3 year term (that is the rates I quoted in my first post, I forgot to include the term!)

I just looked at UBS and it looks to me their rates are 3% for the 10 year right now - oder?
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  #32  
Old 19.07.2011, 18:16
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Re: Buying a house, getting the 20%

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That is a very useful chart - thanks for posting!

I have a question regarding terms on 1st and 2nd hypothek. Do people usually have them running at different terms to hedge against changes in the interest rate, or with the rates so low right now, does it make more sense to lock everything in at 1st hypothek at 1.85% and 2nd =.5% higher or 2.35%?

Sorry if I should start a new thread for this...
personally i locked in one for 10 years and the other is a spread over 3 month LIBOR.

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Old 19.07.2011, 18:35
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Re: Buying a house, getting the 20%

As others have said, downsize the apartment.
It's not funny, but really the only way to generate significant savings (apart from earning more or winning the Euromillions lottery).

As for builder-nightmares: you can hire people who watch professionally over every step the various contractors do - for a fee.
But the fee is much lower than any after-the-fact fixing, or law-suits etc.
Spending 10 or even 15k on somebody who knows all the pitfalls, all the dirty tricks is a no-brainer, IMO.
You can become somewhat of an expert, by reading forums etc. - but usually one already has a day-job....
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Old 19.07.2011, 18:39
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Re: Buying a house, getting the 20%

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Dont be mean to Lenzburg, I happen to live very close, and sure its probably the boring mid sized city in all of europe but its a nice place.
(I hear there is a great Celtic bar tucked away there though)
It's not that I'm mean to Lenzburg, it's quite pretty, actually, but I also know that my friend has an amazing 4.5 room new build apartment with 3 metre ceilings in Zurich for the same price, so something is amiss.

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Curious as to why you decided to lock it for 10 years? I can understand the reasons when thinking that the rates will rise (really can't go lower!), but with 1 and 2 year rates at sub 2%, do you think that rates will rise above 3% in the next year or 2 justifying locking in the 2.95% 10 year term? Also, is that for 1. and 2. Hypothek? Where we are looking, the 2nd Hypothek is 0.5% higher than the first. We are considering taking a 3 year term (that is the rates I quoted in my first post, I forgot to include the term!)

I just looked at UBS and it looks to me their rates are 3% for the 10 year right now - oder?
Like I said, it varies from week to week, I probably could have got lower but there is this thing that is worth a lot to me as stress makes me physically ill due to a medical condition - it's called peace of mind. I know I will be able to definitely afford my "rent" for the next ten years and maybe even help pay off a bit more of the mortgage than strictly necessary, so that when the mortgage rates do go up, it won't be so hardcore. That's all the thinking that went into it, I'm afraid, I don't have much patience for constantly hunting the best deal, as time and energy is a valuable commodity when you spend quite a lot of time being sick.

There is a part that is libor, about 20 percent, I think, but if the Libor goes up, there is stuff that can be sold to pay it off right away, thus making it a small risk.
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Old 19.07.2011, 18:55
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Re: Buying a house, getting the 20%

i was thinking along the same lines. the 10 year lock in is pure risk-mitigation and to buy peace of mind, and so you pay a premium for it.

you don't buy insurance because you think your house will burn down, but because the impact of such an event is significant enough for you to pay to insure against.
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Old 19.07.2011, 19:12
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Re: Buying a house, getting the 20%

There's also not much point getting a 3 year fix if you don't think the rates will rise in the next 2-3 years....but by buying the 10 year fix you are 'protected' long term for a known cost.

The alternative is a cap - take advantage of the current low floating rate, but have it capped at some level. I have seen some products like this I believe, but not sure how customisable they are.
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Old 19.07.2011, 19:29
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Re: Buying a house, getting the 20%

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There's also not much point getting a 3 year fix if you don't think the rates will rise in the next 2-3 years....but by buying the 10 year fix you are 'protected' long term for a known cost.

The alternative is a cap - take advantage of the current low floating rate, but have it capped at some level. I have seen some products like this I believe, but not sure how customisable they are.

But if the rates don't go up in the next 2-3 years, then there is no loss and I can get another x year term then with low interest rates, but have saved 1000 CHF per month for those 3 years vs the 10 year rate... or is there something I am missing?
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Old 19.07.2011, 20:03
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Re: Buying a house, getting the 20%

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But if the rates don't go up in the next 2-3 years, then there is no loss and I can get another x year term then with low interest rates, but have saved 1000 CHF per month for those 3 years vs the 10 year rate... or is there something I am missing?
if you don't think rates will go up over the next 2-3 years, then just go for LIBOR and have an even cheaper mortgage.

but once there's an inkling that rates are going up, you'll find that you can no longer lock-in the long term rates at low cost.

i did look into getting libor warrant caps which give you more fine grained control of your risk hedging, but in the end, i just went with the simpler option.
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Old 19.07.2011, 21:21
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Re: Buying a house, getting the 20%

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That is a very useful chart - thanks for posting!

I have a question regarding terms on 1st and 2nd hypothek. Do people usually have them running at different terms to hedge against changes in the interest rate, or with the rates so low right now, does it make more sense to lock everything in at 1st hypothek at 1.85% and 2nd =.5% higher or 2.35%?

Sorry if I should start a new thread for this...
People usually have them running at different terms to hedge against changes in the interest rate, or they have one fixed & one variable (LIBOR).
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Old 19.07.2011, 21:57
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Re: Buying a house, getting the 20%

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People usually have them running at different terms to hedge against changes in the interest rate, or they have one fixed & one variable (LIBOR).

mortgages were much simpler and straightforward in the US when we bought our first house . Now if I could just get my hand on that crystal ball, it would help out with a lot of decisions!
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