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Old 17.07.2017, 11:54
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Buy to rent

Hi,
I searched in the forum but could not find a definitive answer. can anyone tell us what are the implications of buying the first property to rent? because of dependencies of school, we decided to buy our first property to rent but we may consider moving in in the future. as far as i know


1) such a property the full 20% should be funded by self which means we cant touch the pension fund for this kind of purchase. is this correct?
2) if we decide a buy a second property in the future, i heard that the interest rates would be higher. does anyone know how high?


are there any other factors to consider from tax perspective for the above scenerio?


Thanks in advance
happycreature
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Old 17.07.2017, 12:31
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Re: Buy to rent

You can't use pension fund to finance it. Although, you could use 3a if you'd live there for a while, but not pillar 2 - its withdrawal comes with strings attached

Downpayment will be bigger than 20% due to affordability criteria. Unlike homeowning where you have job income, here you only have rental income, it has to be profitable assuming 5% interest rates from bank's point of view
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Old 17.07.2017, 13:20
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Re: Buy to rent

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You can't use pension fund to finance it. Although, you could use 3a if you'd live there for a while, but not pillar 2 - its withdrawal comes with strings attached

Downpayment will be bigger than 20% due to affordability criteria. Unlike homeowning where you have job income, here you only have rental income, it has to be profitable assuming 5% interest rates from bank's point of view
Hi Ivank,
Thanks for your reply. But the second paragraph is a bit confusing. is this about point 1 i asked or about point 2 about buying a second home in the future. can you please clarify? we are a couple and both working and put down both incomes as job income which should be sufficient for 2 houses in my view.


cheers
happycreature
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Old 17.07.2017, 13:39
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Re: Buy to rent

I guess the bank should consider your salary towards affordability calculations, but then you have a rent to pay yourself, so that negates some things. I suppose a criterion could be something like: your rent (*3 ?) + expenses at 5% - rent < 1/3 salary, but check with banks, rules vary
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Old 17.07.2017, 13:59
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Re: Buy to rent

One factor is the purchase price vs. bank valuation.
The bank will provide a loan of up to 80% of their valuation, not of the purchase price. Often the price is, however, higher than the valuation => more than 20% may be needed.


As for second home interest, I remember 2 years back, a friend was buying a holiday home and the mortgage rate was approx. 0.4%pts higher than for "normal"/primary residence mortgages. Not sure what the differential would be now; this was with UBS.
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