Go Back   English Forum Switzerland > Help & tips > Housing in general
Reply
 
Thread Tools Display Modes
  #41  
Old 15.05.2018, 18:49
Don Molina's Avatar
Forum Veteran
 
Join Date: Jul 2012
Location: Zurich
Posts: 770
Groaned at 33 Times in 21 Posts
Thanked 1,086 Times in 469 Posts
Don Molina has a reputation beyond reputeDon Molina has a reputation beyond reputeDon Molina has a reputation beyond reputeDon Molina has a reputation beyond repute
Re: Down Payment Usually Required?

Quote:
View Post
I dont get you. Why would the house price go down if the rent goes up... anyways: A bank has to make sure I can pay my monthly installments. A bank does not have to make sure that I never lose any money. My personal risk and personal decision. Other than the legal barriers to make sure people dont take too much credit compared to their income should a bank only be focussed on not losing money, so they need to trust into the securities you offer for the credit. In other words: the house. If the bank does not value Swiss real estate at the price it is currently going for does this tell you more about the Swiss market than anything else.
Property is collateral for the bank, so its value is very much relevant to the bank's risk management. You're borrowing 80% of the value of the property, and if the value starts dropping, the bank's collateral value is dropping.

You're right in that the bank doesn't care if YOU (we, really) lose money; in this particular case it's trying to make sure IT won't lose money IF you go bust on the loan.


Quote:
View Post
Because the Swiss pension system relies on the working part of society to pay rent.
So it's OK, we can consider rent as part of our pension contributions
Mine goes to Coop Pensionskasse, but I do hope that people paying into the Coop PK rent properties that my PK owns
__________________
Nothing is fool-proof to a sufficiently talented fool
Reply With Quote
  #42  
Old 15.05.2018, 18:50
Newbie 1st class
 
Join Date: Sep 2017
Location: Luzern
Posts: 10
Groaned at 0 Times in 0 Posts
Thanked 11 Times in 5 Posts
memihai has no particular reputation at present
Re: Down Payment Usually Required?

Would be **both** 1.st and 2.nd Mortgages with fixed rate for the first 10 years?
Reply With Quote
  #43  
Old 15.05.2018, 18:51
st2lemans's Avatar
Forum Legend
 
Join Date: Dec 2010
Location: Lugano
Posts: 24,406
Groaned at 1,380 Times in 1,069 Posts
Thanked 28,107 Times in 13,431 Posts
st2lemans has a reputation beyond reputest2lemans has a reputation beyond reputest2lemans has a reputation beyond reputest2lemans has a reputation beyond reputest2lemans has a reputation beyond reputest2lemans has a reputation beyond repute
Re: Down Payment Usually Required?

Quote:
View Post
Earning 144k borrowing 800k is 5.55 times earnings which is an absurd amount. When I bought my first property Banks limited to 2.75 earnings or 396k with a 144k salary. No wonder prices rose everybody could borrow more & then add a wife working
Sory, but facts are NOT allowed here!

Tom
Reply With Quote
The following 2 users would like to thank st2lemans for this useful post:
  #44  
Old 15.05.2018, 18:54
Forum Legend
 
Join Date: Mar 2016
Location: Leimbach, Zürich
Posts: 3,990
Groaned at 203 Times in 162 Posts
Thanked 4,116 Times in 2,093 Posts
EdwinNL has a reputation beyond reputeEdwinNL has a reputation beyond reputeEdwinNL has a reputation beyond reputeEdwinNL has a reputation beyond reputeEdwinNL has a reputation beyond repute
Re: Down Payment Usually Required?

Quote:
View Post
I wrote "One can afford 1000/month in maintenance charges and 3000 of interest+principal expenses (4000/month is under 33% of the income)"
My mistake.
Quote:
Quote:
Make that even "2000/month in maintenance charges and 3000 of interest+principal" (but still within 33% of monthly income) and it simply doesn't make sense not to approve a 800K mortgage just because the assumed interest payment is over 3000/month while the actual interest+principal payment for the next 10 years is 3000/month, followed by the assumed interest payment at the end the terms of less than 3000/month.
In other words, the bank is guaranteed that my overall housing cost will remain within CHF 5000/month limit forever as long as the interest rate in the 11th+ year remains under 6.8% (and they're ok with 5% as the 'safety margin')
If 5K is less than 33% one can get a mortgage of 800K But I get your point.

Thing is that this has become an often spoken about issue due to the historical low interests. I do not know exactly how the Swiss government sets the imputed interest but where I come form they take the average of the last 10 years which is also 5%, so I assume the Swiss have a sort of equal system. Some years ago this ment that one would have an interest of let's say 5% but imputed interest was 6% making the difference 20%, now one can get an interest of 1% and imputed interest is 5% making the difference 400% which is damn huge.

I am against looking only at what one can afford now, and do strongly believe there should be a buffer that protects people against themselves (and the banks..), but I am all in favour of a more flexibel system.

Overvalue protects against financial problems when forced to sell. That one has to move and perhaps go towards rental is to me not a problem. So the higher the percentual overvalue towards the mortgage the lower the protectional buffer can be to me (with a minimum yet to be set value remaining). If a house is currently worth 1.500.000 and one does a downpayment of 500.000,- the house has to drop more than 33% (quick sell value) before problems would arise.

Guaranteed regular downpayment on the mortgage and a fixed interest for years is for me also a reason to lower the protectional buffer. (with how much has to be calculated based on remaining amount, but for example.

Mortgage 1.000.000 downpayment 2.000,-/month interest 1%, imputed interest 5% 10 years fixed.

Total downpayment over 10 years is 120 * 2.000 = 360.000,- remaining mortgage is 640.000,-
Now use that 5% (imputed) on 640.000,- = 32.000,-
32.000,- = 3.2% of the initial 1.000.000,-
Add a risk buffer of 25% of the difference. (5 - 3.2 = 1.8 , 1.8 / 4 = .45 , 3.2 + .45) = 3.65% new imputed interest.

This risk buffer to save people some for if they get a lower income, kids whatever and are demanded to lower their monthly downpayment. The more you promise to pay off, the bigger the risk of not doing so.

Than take of due to own investment and value of the house. The first 20% I'd leave "untouched" as a buffer, and if quick sale is needed prices often go down, and of the remaining 80% of the value I'd say for every percent people pay off, the imputed interest can drop with one %, so if a total of 60% has been paid off immediately the imputed interest goes down 50% and becomes 3.65/2 = 1.825%

These numbers are all open for debate, and risks due to age non steady income and such can all be added. But it allows people who would never be able to buy but are able to save, or inherit etc.. to buy easier while keeping a buffer more set to their situation. Instead of the harsh hard limit of 5% which makes it impossible to buy for a lot of people who would be perfectly fine to buy if one would actually look at their situation.
Reply With Quote
  #45  
Old 15.05.2018, 19:13
curley's Avatar
Forum Legend
 
Join Date: Oct 2006
Location: canton ZH
Posts: 7,891
Groaned at 105 Times in 95 Posts
Thanked 8,300 Times in 4,458 Posts
curley has a reputation beyond reputecurley has a reputation beyond reputecurley has a reputation beyond reputecurley has a reputation beyond reputecurley has a reputation beyond reputecurley has a reputation beyond repute
Re: Down Payment Usually Required?

Quote:
View Post
Earning 144k borrowing 800k is 5.55 times earnings which is an absurd amount. When I bought my first property Banks limited to 2.75 earnings or 396k with a 144k salary. No wonder prices rose everybody could borrow more & then add a wife working
When did you say you got married again?
Reply With Quote
This user would like to thank curley for this useful post:
  #46  
Old 15.05.2018, 19:41
fatmanfilms's Avatar
Forum Legend
 
Join Date: Apr 2010
Location: Verbier
Posts: 16,549
Groaned at 277 Times in 230 Posts
Thanked 14,037 Times in 7,832 Posts
fatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond repute
Re: Down Payment Usually Required?

Quote:
View Post
When did you say you got married again?
Wife is still working even through she is older , it's actually cost me an additional 5000 euros in Maltese tax from 2018 being married. I now have a minimum 5k Malta tax bill if joint worldwide earnings exceed 35k, even through wife's earnings are taxed in the UK.
Reply With Quote
  #47  
Old 15.05.2018, 22:12
Banned
 
Join Date: Feb 2014
Location: The World
Posts: 1,388
Groaned at 296 Times in 160 Posts
Thanked 1,115 Times in 636 Posts
Capo is considered unworthyCapo is considered unworthyCapo is considered unworthyCapo is considered unworthy
Re: Down Payment Usually Required?

Quote:
View Post
Earning 144k borrowing 800k is 5.55 times earnings which is an absurd amount. When I bought my first property Banks limited to 2.75 earnings or 396k with a 144k salary. No wonder prices rose everybody could borrow more & then add a wife working
Quote:
View Post
Sory, but facts are NOT allowed here!

Tom
Indeed, it baffles me that some people keep whining about banks not wanting to loan more when the person is already very leveraged. Why they did not money and invest more before deciding to buy a property?

The fact is that Switzerland has a combination of low interest rates, very limited supply of real estate, and high salaries, causing high prices.

In the Dallas-Fort Worth area a brand new 5-room house, in a very nice neighborhood, costs a mere 180k USD. Why? Mainly because there are a ton of new constructions and average salaries are not that high.
Reply With Quote
This user would like to thank Capo for this useful post:
  #48  
Old 16.05.2018, 05:55
Member
 
Join Date: Aug 2011
Location: Risch
Posts: 191
Groaned at 2 Times in 2 Posts
Thanked 109 Times in 77 Posts
KiwiSteve is considered knowledgeableKiwiSteve is considered knowledgeableKiwiSteve is considered knowledgeable
Re: Down Payment Usually Required?

Quote:
View Post
Sory, but facts are NOT allowed here!

Tom
Those factual numbers are very very close to our factual financing taken out in 2008. Absurd? Why?
Reply With Quote
  #49  
Old 16.05.2018, 06:00
Member
 
Join Date: Aug 2011
Location: Risch
Posts: 191
Groaned at 2 Times in 2 Posts
Thanked 109 Times in 77 Posts
KiwiSteve is considered knowledgeableKiwiSteve is considered knowledgeableKiwiSteve is considered knowledgeable
Re: Down Payment Usually Required?

Quote:
View Post

These numbers are all open for debate, and risks due to age non steady income and such can all be added. But it allows people who would never be able to buy but are able to save, or inherit etc.. to buy easier while keeping a buffer more set to their situation. Instead of the harsh hard limit of 5% which makes it impossible to buy for a lot of people who would be perfectly fine to buy if one would actually look at their situation.
Which is where the conspiracy theories come in. Who benefits from this situation?
Reply With Quote
This user would like to thank KiwiSteve for this useful post:
  #50  
Old 16.05.2018, 11:38
Forum Legend
 
Join Date: Oct 2014
Location: Ostschweiz
Posts: 6,149
Groaned at 208 Times in 178 Posts
Thanked 7,719 Times in 4,029 Posts
Urs Max has a reputation beyond reputeUrs Max has a reputation beyond reputeUrs Max has a reputation beyond reputeUrs Max has a reputation beyond reputeUrs Max has a reputation beyond reputeUrs Max has a reputation beyond repute
Re: Down Payment Usually Required?

Quote:
View Post
They even have exceeded 10%
Not really, that was the interest for lombard credits by the SNB to commercial banks, credits where select securities were used as collateral. These days REPO serves the same purpose.

The top for mortgages was registered in 1991/92 at around 7% for new and 6-6.5% for already-existing ones. See the SNB on historic data.
Reply With Quote
  #51  
Old 16.05.2018, 12:10
Forum Legend
 
Join Date: Mar 2016
Location: Leimbach, Zürich
Posts: 3,990
Groaned at 203 Times in 162 Posts
Thanked 4,116 Times in 2,093 Posts
EdwinNL has a reputation beyond reputeEdwinNL has a reputation beyond reputeEdwinNL has a reputation beyond reputeEdwinNL has a reputation beyond reputeEdwinNL has a reputation beyond repute
Re: Down Payment Usually Required?

Quote:
View Post
Not really, that was the interest for lombard credits by the SNB to commercial banks, credits where select securities were used as collateral. These days REPO serves the same purpose.

The top for mortgages was registered in 1991/92 at around 7% for new and 6-6.5% for already-existing ones. See the SNB on historic data.
I must have looked at a wrong source.

Top on mortgages in surrounding countries has been much higher than here, My parents bought another home in the Netherlands in the 80's with 12% interest...
Reply With Quote
  #52  
Old 16.05.2018, 12:21
Forum Legend
 
Join Date: Mar 2016
Location: Leimbach, Zürich
Posts: 3,990
Groaned at 203 Times in 162 Posts
Thanked 4,116 Times in 2,093 Posts
EdwinNL has a reputation beyond reputeEdwinNL has a reputation beyond reputeEdwinNL has a reputation beyond reputeEdwinNL has a reputation beyond reputeEdwinNL has a reputation beyond repute
Re: Down Payment Usually Required?

Quote:
View Post
Which is where the conspiracy theories come in. Who benefits from this situation?
Almost everybody I'd say.

The bank can hand out more loans.
The public as they are able to get a loan which is more pointed towards their situation.

Houseprices might go up some more due to more people being able to buy, with how much I cannot tell, I also do not know how many more people would be able to buy.

I just find it ridiculous that even tho I understand the need for a buffer, that in percentage the buffer is incredible huge at the moment, sometimes even more than 400% and does not take in account overvalue on the property (making it possible to pay of the mortgage when forced to sell), or downpayment during the running period of the mortgage (making the amount on which a higher interest could occur lower)

I like a system where if risk is brought down that imputed interest lowers, since the need for protection has lowered.

It's a thought, and if implementation (not happening tho) would be considered some people should calculate it all through to see the full effect, and on such we should alter the numbers or perhaps throw the whole idea in the bin.
Reply With Quote
  #53  
Old 16.05.2018, 14:14
Forum Legend
 
Join Date: Oct 2014
Location: Ostschweiz
Posts: 6,149
Groaned at 208 Times in 178 Posts
Thanked 7,719 Times in 4,029 Posts
Urs Max has a reputation beyond reputeUrs Max has a reputation beyond reputeUrs Max has a reputation beyond reputeUrs Max has a reputation beyond reputeUrs Max has a reputation beyond reputeUrs Max has a reputation beyond repute
Re: Down Payment Usually Required?

Quote:
View Post
I must have looked at a wrong source.
The probably LIBOR was as high as shown, same for short-term interests.

But they're not the same as mortgage rates. Plus, mortgage rates were (still are) under heavy political influence due to their general importance. As a result banks at that time were unable to raise interests as much as they wanted, and probably should have from a purely economical perspective.

As for the 12%: Inflation was way higher at that time. If you take a look at any western country's interest and inflation rates over the last 40 years you will notice one thing in each and every case I'm aware of: They've been falling, and roughly in tandem. Of course with ups and downs, but still with an unmissable general downward trend. For perhaps 30 years until 2008/09, inflation in CH has been 1-2% below DE/NL and 2-3% below US rates, on average.
Reply With Quote
  #54  
Old 16.05.2018, 14:37
Forum Legend
 
Join Date: Oct 2014
Location: Ostschweiz
Posts: 6,149
Groaned at 208 Times in 178 Posts
Thanked 7,719 Times in 4,029 Posts
Urs Max has a reputation beyond reputeUrs Max has a reputation beyond reputeUrs Max has a reputation beyond reputeUrs Max has a reputation beyond reputeUrs Max has a reputation beyond reputeUrs Max has a reputation beyond repute
Re: Down Payment Usually Required?

Quote:
Most other countries I know are somewhere in between. So I simply don't accept that anyone who dares to not fully support the Swiss system should be brushed off with "We don't want to be America". That's a bit simplistic. And since Switzerland is in most other ways actually not a nanny state but behaves the very opposite do I find it very natural to question why in this particular topic things are so different here. And I for one believe it is the political will to have as many people as possible renting. Its also the political will to keep foreign real estate investors out of the country, so most larger companies owning apartments are either cooperatives (or whatever Genossenschaft is in English) or pension funds. So anyone who thinks the regulations are in place for consumer protection alone does in my eyes miss the political picture of it completely.
I'm surprised to see this coming from you, you don't come across as one who believes in large-scale conspiracy theories.

Total amount of mortgages outstanding is about 160% of the Swiss GDP already. Talk about over-indebtedness and inability to pay the interest once rates rise significantly (not that that's likely to happen for at least a few years).

As has been shown above, providing more credit to prospective homeowners will probably drive prices up even more. That could lead to a repeat of the late '80ies and early '90ies that saw huge price increases, followed by a big drop and continued falling prices. Instead of deflating the balloon then, the government pricked it and had it explode in the general public's face. The banks had to write off 10-15% of total mortgages outstanding (depending on who's estimate you rely on), the commercial real estate market kept dropping until around the millenium and put a severe damper on the overall economy as a result.

Nobody knows if we're not in bubble territory already, but at least this time around the powers-that-be try to not repeat past mistakes; this time they try to avoid pumping up the balloon too much. The banks appear to reluctantly agree, otherwise there'd much more pressure to change the parameters that determine how much credit you get. It's no coincidence UBS developed and keeps publishing their survey that show areas with overheating real estate prices.

Change in nominal GDP vs. credit volume, see below. While one may brush aside the gap until 2007, doing so with what followed would probably be detrimental on a very large scale:

Reply With Quote
Reply




Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
20% Down payment 3 years before posession blueturtle Housing in general 14 27.02.2018 19:26
Warranty/Down payment sailorimc Finance/banking/taxation 8 21.08.2015 17:30
a general question about down-payment Jasper Housing in general 13 22.09.2013 20:30
House down payment - timing? Frau Dreyer Housing in general 5 18.06.2013 21:26
Does it make sense to put 13K as a down payment for leasing a car? Pretty_in_pink Transportation/driving 19 02.11.2010 08:33


All times are GMT +2. The time now is 15:23.


Powered by vBulletin® Version 3.8.4
Copyright ©2000 - 2018, Jelsoft Enterprises Ltd.
LinkBacks Enabled by vBSEO 3.1.0