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  #21  
Old 19.11.2019, 12:13
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Re: Is it worth buying a flat in Switzerland?

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I've been told the opposite, many times.

The interest you pay is based on the size of your mortgage, which should decrease as you pay it off, correct? The tax you pay is based on the value of the property I'd assume, and this is unlikely to decrease.

So if I'm correct with both of my previous statements, isn't there a cross over point where paying the interest on the mortgage becomes less than the tax?

Or are you certain that this is universally not going to happen, no matter the value of the property?
Neither. I'm just saying the two are independent of each other.
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Old 19.11.2019, 12:34
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Re: Is it worth buying a flat in Switzerland?

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I've been told the opposite, many times.

The interest you pay is based on the size of your mortgage, which should decrease as you pay it off, correct? The tax you pay is based on the value of the property I'd assume, and this is unlikely to decrease.

So if I'm correct with both of my previous statements, isn't there a cross over point where paying the interest on the mortgage becomes less than the tax?

Or are you certain that this is universally not going to happen, no matter the value of the property?
Firstly, it is usual for 60/65% of a mortgage to be interest-only and never paid off.

The valuation for Eigenmietwert (the estimated value added to you income for owning a property) does not appear to change from its first assessment by the local council. I have lived in 2 homes I owned. The forst for 10 years, the second for 11. The valuation remaned unchanged in both cases...
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  #23  
Old 19.11.2019, 12:43
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Re: Is it worth buying a flat in Switzerland?

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The interest you pay is based on the size of your mortgage, which should decrease as you pay it off, correct? The tax you pay is based on the value of the property I'd assume, and this is unlikely to decrease.
If you live in a self owned property a computed rental value (Eigenmietwert) is added to your income. This amount is fixed. The tax itself is not fixed and depends on your overall net income. It is a kind of property tax, where the rich, high income people pay more than the poor lads.

If you pay interest you can deduct it from your income. The tax which saved depends on the marginal tax rate. But in any case, as the marginal tax rate is less than 100% (AFAIK the highest possible is in Ct. Geneva which is ~45%) the tax saved will always be less than what you paid in interest.

If you subtract the tax saved from interest paid, the perceived interest rate of the mortgage is lowered. If you are able to invest the money in a scheme which has a better return than the perceived interest rate than you should do so. If there is no such investment which performs better you should pay back the mortgage. Best if the investment is income tax free. (This leaves out the question if you should invest borrowed money).

Non surprisingly, banks offer "better preforming" products to its mortgage clients. The trap is that you not pick the product which is best for you but you are offered a product which has a high management fee. But even if the fee is low, the bank wins if you buy their investment product while also having a mortgage with them.
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Old 19.11.2019, 14:41
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Re: Is it worth buying a flat in Switzerland?

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Is it better to buy or rent? If you have have the cash to buy a flat, is it a better deal to buy rather than renting and keeping the cash invested?
Until recently I owned two flats in Switzerland that I have had for about ten years. Both bought off plan. Just sold one at 50% gain on cash invested (15% gain on total price including mortgage). Canton withheld 5% of sale price, has now agreed on tax (15%) and will refund balance. I then have to pay 20% capital gains tax to USA, plus maybe part also subject to Obamacare 3.8% tax (CGT is subject to foreign tax credit; Obamacare tax, like Alternative Minimum Tax, is a tax treaty override not subject to any foreign credits).

I still own another, somewhat cheaper, flat bought earlier than the one I sold. It is worth less than I paid. I've been renting it out at a gross yield of about 2.5% on purchase price (not counting service charges, taxes, mortgage interest) and it's not worth selling at a loss. Except the tenant hasn't paid rent for over 4 months and the agent gave him notice to vacate at the end of this month. He is impoverished (why did the agent rent to him) and elderly. Don't know what will happen if he doesn't vacate.

US CGT is based on cost and sale prices without regard to exchange loss; exchange gains are taxable as ordinary gain. On rental property only you can claim an exchange loss over the mortgage balance. In principle every mortgage instalment of capital creates a gain (taxable whether or not rented) or loss (deductible if rented). But the unsold flat has no capital repayment provision (the one I sold did).

For US taxpayers: it may pay to rent for a year before selling: do the math. See the relevant court decision here (Quijano case): https://openjurist.org/93/f3d/26/qui...-united-states The UK is worse: same rule on taxation of phantom gain, but no deduction for foreign exchange loss and with the collapse of the pound that means you can sell at a loss and still owe tax.
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Old 19.11.2019, 14:58
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Re: Is it worth buying a flat in Switzerland?

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Until recently I owned two flats in Switzerland that I have had for about ten years. Both bought off plan. Just sold one at 50% gain on cash invested (15% gain on total price including mortgage). Canton withheld 5% of sale price, has now agreed on tax (15%) and will refund balance. I then have to pay 20% capital gains tax to USA, plus maybe part also subject to Obamacare 3.8% tax (CGT is subject to foreign tax credit; Obamacare tax, like Alternative Minimum Tax, is a tax treaty override not subject to any foreign credits).

I still own another, somewhat cheaper, flat bought earlier than the one I sold. It is worth less than I paid. I've been renting it out at a gross yield of about 2.5% on purchase price (not counting service charges, taxes, mortgage interest) and it's not worth selling at a loss. Except the tenant hasn't paid rent for over 4 months and the agent gave him notice to vacate at the end of this month. He is impoverished (why did the agent rent to him) and elderly. Don't know what will happen if he doesn't vacate.

US CGT is based on cost and sale prices without regard to exchange loss; exchange gains are taxable as ordinary gain. On rental property only you can claim an exchange loss over the mortgage balance. In principle every mortgage instalment of capital creates a gain (taxable whether or not rented) or loss (deductible if rented). But the unsold flat has no capital repayment provision (the one I sold did).

For US taxpayers: it may pay to rent for a year before selling: do the math. See the relevant court decision here (Quijano case): https://openjurist.org/93/f3d/26/qui...-united-states The UK is worse: same rule on taxation of phantom gain, but no deduction for foreign exchange loss and with the collapse of the pound that means you can sell at a loss and still owe tax.
Moral of the story: don't be an American!
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  #26  
Old 19.11.2019, 15:05
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Re: Is it worth buying a flat in Switzerland?

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I've been told the opposite, many times.

The interest you pay is based on the size of your mortgage, which should decrease as you pay it off, correct? The tax you pay is based on the value of the property I'd assume, and this is unlikely to decrease.

So if I'm correct with both of my previous statements, isn't there a cross over point where paying the interest on the mortgage becomes less than the tax?

Or are you certain that this is universally not going to happen, no matter the value of the property?
Under current rules (which are subject to change), mortgagors can claim a tax deduction for the interest they pay, but must pay a tax based on a (whimsical) valuation of the property (Eigenmietwert, in German). In most cases, that tax is considerably less than the value of the tax deduction. That's the balancing act you need to consider, not the absolute interest value vs the Eigenmietwert-based increase in tax.
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  #27  
Old 19.11.2019, 15:08
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Re: Is it worth buying a flat in Switzerland?

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Depends what else you invest in, I personally don't like illiquid investments but my wife wants a bigger place, so against my better judgement....... Happy wife means a happy life
A bigger place in Switzerland or Malta, seeing as your main residence is Malta?
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Old 19.11.2019, 17:03
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Re: Is it worth buying a flat in Switzerland?

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A bigger place in Switzerland or Malta, seeing as your main residence is Malta?
Just finished building an additional floor in Malta, there is now space for my wife's clothes for at least a couple of years1 Just over the border in Chamonix where WE spend the winter, it's too small, prices are similar to Zurich per m2, although substantially less than Verbier.
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Old 19.11.2019, 17:23
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Re: Is it worth buying a flat in Switzerland?

Maybe you should look at Cluses.
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Old 19.11.2019, 17:30
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Re: Is it worth buying a flat in Switzerland?

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Just finished building an additional floor in Malta, there is now space for my wife's clothes for at least a couple of years1 Just over the border in Chamonix where WE spend the winter, it's too small, prices are similar to Zurich per m2, although substantially less than Verbier.



Guess it's lucky you not Muslim with 4 wives then .....
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Old 19.11.2019, 17:31
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Re: Is it worth buying a flat in Switzerland?

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Just finished building an additional floor in Malta, there is now space for my wife's clothes for at least a couple of years1 Just over the border in Chamonix where WE spend the winter, it's too small, prices are similar to Zurich per m2, although substantially less than Verbier.
I hope you aren't blocking anyone's view with that extra floor - it would be a shame to make the Maltese cross.
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  #32  
Old 19.11.2019, 17:50
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Re: Is it worth buying a flat in Switzerland?

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I hope you aren't blocking anyone's view with that extra floor - it would be a shame to make the Maltese cross.
Somebody built in front of us, we are now the tallest building, I have the 3/4/5 th floor, just put a further staircase unto the roof, keeps us fit as there is no lift.
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Maybe you should look at Cluses.
St Gevais is about 40% of the price as are places in the Grand Massif, however my wife wants to move only a few hundred meters from our current flat. I found an 165m2 Apartment in Argentiere, competitively priced, however thats too far even through we ski there most days!
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Guess it's lucky you not Muslim with 4 wives then .....
I suspect they would be more obedient.
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Old 19.11.2019, 18:14
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Re: Is it worth buying a flat in Switzerland?

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YES!

It may not suit everybody, but buying my own home was the best financial move I made in my life. I cannot imagine renting and paying out 10s of 1000s a year when I can live in my own home for interest rates around 1%.

Contrary Omtatsat‘s usual ill-informed comment it is an excellent system. Today approx CHF830 per month, or less, will get you CHF1million mortgage on a home and asset that will appreciate - with renting all that goes up is the rent...
If you have a very good income and alot of money saved then maybe you will get a credit. For the average jo blow impossible!!!
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Old 19.11.2019, 18:20
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Re: Is it worth buying a flat in Switzerland?

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Somebody built in front of us, we are now the tallest building, I have the 3/4/5 th floor, just put a further staircase unto the roof, keeps us fit as there is no lift.
At least when you are a bit too senior to go zooming up the stairs any more, a man of your means can hire a valet tasked with doing the heavy lifting.
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Old 19.11.2019, 18:23
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Re: Is it worth buying a flat in Switzerland?

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Guess it's lucky you not Muslim with 4 wives then .....
you have something against Muslims?
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  #36  
Old 19.11.2019, 18:44
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Re: Is it worth buying a flat in Switzerland?

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At least when you are a bit too senior to go zooming up the stairs any more, a man of your means can hire a valet tasked with doing the heavy lifting.
That was last year after breaking my back! I bought the place as I thought when I can't manage 3/4 flights of stairs, I won't be able to ski so I may as well go to Dignatas.
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Old 19.11.2019, 19:07
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Re: Is it worth buying a flat in Switzerland?

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you have something against Muslims?
Jesus...

Guys!!
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Old 19.11.2019, 20:13
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Re: Is it worth buying a flat in Switzerland?

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Jesus...

Guys!!
No, they like him.
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Old 21.11.2019, 13:31
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Re: Is it worth buying a flat in Switzerland?

Steve678, have you actually found a property that you have a reasonable chance of winning the bid to buy?

That is the largest hurdle IME in Switzerland. The hunt for a halfway decent house under X gazillions, the cut-throat competition for that halfway decent house, the games played by estate agents... If you think trying to rent here is tough, trying to buy can be soul-destroying.

As to pros and cons:

Renting at the silly rate required when one is an 'undesireable' tenant cost us an arm and a leg and several other internal organs. The quarterly cost of our mortgage is less than a decent dinner out. So a financial positive there.

However as Americans we do not benefit from any tax savings in owning, as (Reader's Digest Condensed version) whatever we don't pay to Switzerland we end up paying to Uncle Sam. So at best that's a financial neutral.

When the time comes to sell that's when things could get ugly. As Caryl points out upthread, Americans have to deal with differences between tax regimes. If the many ways I have run the numbers are even close to correct, selling here could end up a financial negative.

All in all, looking at our numbers, owning has been largely financially neutral, with the potential for some serious loss when selling.

Obviously YMMV, especially those not burdened with the blue passport.

Then there are the other incidental costs that might surprise someone new to home ownership. A visit to Hornbach or B/H often ends with an empty wallet. And that for just those incidentals - big ticket repairs are another story. One should keep a comfortable cushion for the unexpected.

When considering financials, one has to factor in opportunity cost of all the money you need to sink into the house. Do you have other more attractive options for those funds?

My primary motivation for buying was that I couldn't stand renting, it's just not how I was used to living. I need the security of owning the ground beneath my feet. I guess that's my US midwestern DNA.

I thought that in buying I would escape the 'life under the microscope' aspect of renting. However, in Switzerland, a man's home is not his castle, as it is elsewhere. Here one's neighbors hold significant legal sway over the way one may enjoy the use of one's property. So I have all the responsibilities of an owner, but do not have the benefit that is most important to me.

Again, YMMV. If you are comfortable with communal living you likely will not run into this. In fairness, this is not a buy vs rent issue, it's a life in Switzerland issue.

But at least I escaped the evil landlord, which just might tilt the equation into the positive.

Good luck with your decision.
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Old 21.11.2019, 14:23
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Re: Is it worth buying a flat in Switzerland?

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However as Americans we do not benefit from any tax savings in owning, as (Reader's Digest Condensed version) whatever we don't pay to Switzerland we end up paying to Uncle Sam.
Only if you are very high earners, I never paid anything to the US, just had to fill out paperwork.

Tom
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