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Old 19.05.2015, 12:44
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Re: Direct Repayment vs 3a Pillar - let's write down some figures

The answer is very simple - if your investment makes more than the mortgage interest rate, you are better off making the investment rather than paying off the interest.

This is simple leverage in financial terms - using borrowed money to invest. If you didn't use all your savings to buy a house, you're already doing this, and by investing new money rather than paying off you are just maintaining the leverage you already have.

The Pillar 3a stuff is purely a tax efficient way of doing it (with the point that you can actually use the 3a to pay the mortgage, whereas you can't use it as a tax avoidance savings account and withdraw at will).
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Old 13.09.2016, 21:00
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Re: Direct Repayment vs 3a Pillar - let's write down some figures

Reviving this thread again...if there are no tax benefits to consider, then which option makes sense, direct or indirect amortization ?

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Old 13.09.2016, 21:27
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Re: Direct Repayment vs 3a Pillar - let's write down some figures

Isn't that a no brainer? Utilize pillar 3a first, then pay the rest of what you must via direct amortization. There are usually always some tax considerations which make pillar 3a attractive.

Or is your bank charging your extra or sets different terms for indirect amortization?
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Old 13.09.2016, 22:36
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Re: Direct Repayment vs 3a Pillar - let's write down some figures

Sure.. as an employee of an International organization do not pay taxes hence the tax benefits of Pillar 3 are not applicable...
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Old 13.09.2016, 23:02
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Re: Direct Repayment vs 3a Pillar - let's write down some figures

Whoa, any part time job openings?

If you do indeed pay zero taxes, then direct amortization would be likely better - it'd reduce the mortgage interests going forward. The interest that pillar 3a accounts are paying are much lower, almost zero now, unless you buy pillar 3a funds - but those are only marginally more protifitable, yet much riskier than the guaranteed savings from a reduction in mortgage interest.

But if you pay any taxes, and the more you pay them, the more massive of a difference pillar 3a will make. At the top of tax progression, your income is taxed really high, on every extra frank you could pay as much as 40-45% in taxes, which you avoid by buffering the money through pillar 3a first.
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