Another thread about buying a house

[Filmliebhaber]

The second appartment could be used to isolate when you would be back from each trip abroad.


We renew a flat to my sister-in-law exactly for this reason, that I can use it whenever I am back in Switzerland.


Think a lot BEFORE throwing money away on renovations.


I wish I would have never bought one wood stove because we paid nearly 5k to improve the chimney , work that damaged the roof, while our electric heating system costs only a bit over 100 Francs a month.


You can ask to see the old bills for electricity or for gas, to have an idea.

[3Wishes]

Thanks again for all the replies.

Has anyone pledged pillar 2/3 instead of withdrawing? It might be interesting to us in order to keep more cash.

However what I've read online is that pledging pillars increases the mortgage amount because it's not really "counted" as part of the down payment?

Every calculator I can find online lumps the entire thing together no matter how you get the money, so I'm a bit lost.

Online calculator:
Purchase price 1 mil
Down payment 200k, with at least half of that as cash and the rest can be pledged.
Mortgage amount 800k

All the online mortgage calculators spit out a monthly payment amount based on that.

The text of articles I am reading says something different. The articles imply:
Purchase price 1 mil
Down payment 200k, of which 100k is "pledged" by the pillars
Mortgage amount 900k

If you want to pledge even more than the 10% you can if you're under age 50.

The advantage is supposed to be even more tax savings because you take a higher mortgage so you have more debt and higher monthly payments. It's hard to wrap my head around the idea that more debt and higher payments = good.

I've also read about indirect amortization, where the buyer opens a 3rd pillar account and pays the mortgage payments into that. The mortgage amount stays the same year on year, and at the end of the term the money is taken out of the 3a to pay the loan. If we're already contributing max to 3a though, I don't see how this would work or benefit us?

I know we can ask a lot of questions with the banker, but their job is to sell us a loan that makes money for the bank, not necessarily sell us a loan that fits our needs best.

[rainer_d]

	Quote:	3Wishes
	Thanks again for all the replies. Has anyone pledged pillar 2/3 instead of withdrawing? It might be interesting to us in order to keep more cash. However what I've read online is that pledging pillars increases the mortgage amount because it's not really "counted" as part of the down payment? Every calculator I can find online lumps the entire thing together no matter how you get the money, so I'm a bit lost. Online calculator: Purchase price 1 mil Down payment 200k, with at least half of that as cash and the rest can be pledged. Mortgage amount 800k All the online mortgage calculators spit out a monthly payment amount based on that. The text of articles I am reading says something different. The articles imply: Purchase price 1 mil Down payment 200k, of which 100k is "pledged" by the pillars Mortgage amount 900k If you want to pledge even more than the 10% you can if you're under age 50. The advantage is supposed to be even more tax savings because you take a higher mortgage so you have more debt and higher monthly payments. It's hard to wrap my head around the idea that more debt and higher payments = good.

The idea is to invest the money into an investment vehicle that yields more than what you pay in interest.
That may or may not turn out well.

Also, because that money is still in the 2nd pillar, the pension your draw from that is not reduced (or not much). Come retirement, this is relevant in calculating the affordability of the mortgage.

A lot depends on your age, IMO.

[ThomasSSS]

	Quote:	3Wishes
	Thanks again for all the replies. Has anyone pledged pillar 2/3 instead of withdrawing? It might be interesting to us in order to keep more cash. However what I've read online is that pledging pillars increases the mortgage amount because it's not really "counted" as part of the down payment?

Correct, a 20% minimum is the result of regulation and pledging can be seen as an allowed exception to this. As I understand the tax effects, it financially similar to using pre-tax money for the interest - you don't save money overall, but the interest rate is effectively lowered and this increases the chance of finding investments that return more than the mortgage costs.

[basel]

3Wishes, do you have to pay an amount to bid ? what are the consequences of backing away after selected ? if no money to be paid and if you can walk out without financial implications then i do not think it is as phoney as some of the replies suggest.

Usually there are 3 steps.
1. you show interest, i.e either bid or by providing financial confirmation
2. Reserve by paving x amount
3. both party sign at Notary

Inspection by an expert/architect can happen anytime before 1 to before 3, And as long as reservation contract clearly states the consequence of backing away (usually no charge or a nominal charge to put advertisement back online) I would not consider it phoney.

[3Wishes]

Ok, the pillar stuff is clearer now thanks to these posts, and I even found an example online showing the differences in expenses/etc.

In a nutshell, pledging pension = higher mortgage amount and higher costs, but also higher tax deductions. We should weigh up whether pledging saves us a bundle in taxes or if it's not much gain and it's better to pay 20% cash instead.

@basel - thanks for this
No, we don't have to pay any money to bid. We simply send a letter by X date stating how much we're offering. If the seller chooses us, then the details start. Everything I have read says that this offer is not legally binding until we sign in front of a notary, so it seems "safe" at this point. We talked to a friend who has bought a few houses and he said we should offer a bit more than asking price, but not too much since there is work to be done and we'd be responsible for paying for any inspections.

We feel a bit of urgency in trying to understand everything, because it sounds like the seller wants to move quickly and we don't want to be caught making an expensive mistake.

[Big Mara]

Hi 3Wishes, the first thing I do when I am going to buy a house, is to find out the name of the owner (not the agent). Some times the owners of older houses, are building firms who are selling on the condition that they can carry out the reovation work. If the house is in Kanton Bern you can find the owner here:- https://www.map.apps.be.ch/pub/synse...re&language=de The next thing I would do is find out how high is the rebuild estimate of the " Gebäudeversicherung Bern"(GVB) on this house. The rebuild estimate is what the GVB think it would cost to build the house new. Your friends at your local bank can find this very quickly. The GVB make estimates on all houses in Kanton Bern.

[3Wishes]

Thanks, Big Mara.

We know the owner's name and phone number, as he still lives there. Our friend suggested cold calling him and mentioning the local connection to improve our chances. Mr Wishes nearly fainted at the suggestion to randomly call the guy! Proper Swiss don't do such things. He is warming to the idea of sending a more personal offer letter addressed to the owner himself, and only copying the agent.

Thanks for the info on the Gebäudeversicherung Bern. It would be very interesting to know what they think it would cost to build new.

[rainer_d]

The owner has tasked the agent probably because he doesn't want punters to come to his house at all hours or call (and haggle down the price).

[Sigh]

We had 2 buyers come by after they had visited with the agent.
Out of all interested we chose one of the "visitors", so it is definitley worth a try!

[greenmount]

	Quote:	3Wishes
	Thanks, Big Mara. We know the owner's name and phone number, as he still lives there. Our friend suggested cold calling him and mentioning the local connection to improve our chances. Mr Wishes nearly fainted at the suggestion to randomly call the guy! Proper Swiss don't do such things. He is warming to the idea of sending a more personal offer letter addressed to the owner himself, and only copying the agent. .

No, but other non-(proper) Swiss might do it.

[RobScoue]

In auction property if you have any doubt or resitation you will likely loose the bid war.
If you are the highest bidder you will get time to shop for mortgage and do an inspection They will ask you to pay a reservation deposit

[RTN]

	Quote:	3Wishes
	Ok, the pillar stuff is clearer now thanks to these posts, and I even found an example online showing the differences in expenses/etc. In a nutshell, pledging pension = higher mortgage amount and higher costs, but also higher tax deductions. We should weigh up whether pledging saves us a bundle in taxes or if it's not much gain and it's better to pay 20% cash instead. @basel - thanks for this No, we don't have to pay any money to bid. We simply send a letter by X date stating how much we're offering. If the seller chooses us, then the details start. Everything I have read says that this offer is not legally binding until we sign in front of a notary, so it seems "safe" at this point. We talked to a friend who has bought a few houses and he said we should offer a bit more than asking price, but not too much since there is work to be done and we'd be responsible for paying for any inspections. We feel a bit of urgency in trying to understand everything, because it sounds like the seller wants to move quickly and we don't want to be caught making an expensive mistake.

The average bank (UBS in our case) does not always give you all the details, restrictions and best advice regarding pillar funds, amortization and renovation. It was in 2006 a time of rape and pillage and anything goes to earn a fee but I take responsibility for my mistake of following their advice which was quite compelling and made sense to someone new here.

The story.
We bought a single family house which was in major need of renovation at a significantly lower price than market values. My wife and I had sufficient cash funds and income to pay a 33% deposit and renovate the house. Under the guise of tax effective planning they convinced us to redraw the 2nd pillar and only put down 30% deposit (saving our cash for renovations) and amortize the other 3% through permanent comitment to a 3A pillar account. I can now understand why their offered fixed rate was so much better than other banks. What they have effectively done is to lock us in with them until we repay the 2nd Pillar in cash as you can not repay this with a loan from another bank, it also meant we had to pay about Chf6000 into 3A Pillar every year (which is free money for UBS given their piss poor rates of return on these funds!). They did this knowing we were going to renovate which increased the house value about Chf400k which then put the loan to valuation ratio at 43% equity in 3 months, which it did.

If we had only pledged the second pillar and avoided amortization by putting down 33% (and borrowed the shortfall needed for renovations by doing it in stages using the increased equity created by renovations) we would have been free to then negotiate a better rate when the fixed rate ended. It would have also freed up Chf120k which is locked in 3A Pillar funds allowing us to then buy our dream mountain apartment.

You live and learn but ask the question, can we renegoiate terms when the loan to valuation ratio changes?

[3Wishes]

Anyone happen to have a sample offer letter? I'm finding a few things in English but they're not structured for Switzerland so I'm not sure what applies.

Edit - to be clear I'm hoping for a template in German that meets Swiss standards, if there is such a thing

[fatmanfilms]

	Quote:	RTN
	The average bank (UBS in our case) does not always give you all the details, restrictions and best advice regarding pillar funds, amortization and renovation. It was in 2006 a time of rape and pillage and anything goes to earn a fee but I take responsibility for my mistake of following their advice which was quite compelling and made sense to someone new here. The story. We bought a single family house which was in major need of renovation at a significantly lower price than market values. My wife and I had sufficient cash funds and income to pay a 33% deposit and renovate the house. Under the guise of tax effective planning they convinced us to redraw the 2nd pillar and only put down 30% deposit (saving our cash for renovations) and amortize the other 3% through permanent comitment to a 3A pillar account. I can now understand why their offered fixed rate was so much better than other banks. What they have effectively done is to lock us in with them until we repay the 2nd Pillar in cash as you can not repay this with a loan from another bank, it also meant we had to pay about Chf6000 into 3A Pillar every year (which is free money for UBS given their piss poor rates of return on these funds!). They did this knowing we were going to renovate which increased the house value about Chf400k which then put the loan to valuation ratio at 43% equity in 3 months, which it did. If we had only pledged the second pillar and avoided amortization by putting down 33% (and borrowed the shortfall needed for renovations by doing it in stages using the increased equity created by renovations) we would have been free to then negotiate a better rate when the fixed rate ended. It would have also freed up Chf120k which is locked in 3A Pillar funds allowing us to then buy our dream mountain apartment. You live and learn but ask the question, can we renegoiate terms when the loan to valuation ratio changes?

You could have taken a building loan, then converted into a Mortgage when the world were done.

You can try to renegotiate the LTV however not whilst you have any fixed rate deals outstanding.

[greenmount]

	Quote:	3Wishes
	Anyone happen to have a sample offer letter? I'm finding a few things in English but they're not structured for Switzerland so I'm not sure what applies. Edit - to be clear I'm hoping for a template in German that meets Swiss standards, if there is such a thing

If it's not a formal (contractual) bit i.e. envelopes with offers are open in front of a public notary then you can just write down the amount you're bidding or talk directly with the real estate agent.

But imho, don't get your hopes high, there's still no legal obligation to pick the highest bidder if they have other criteria (e.g. they like more a bidder whose offer is close to the highest one).

[3Wishes]

Thanks again to everyone for the feedback and suggestions, both in threads and via PM. Thanks to TalkToYouLater for having a similar thread that happens to ask questions we've not thought about!

Update: The offer letter is in the mail. We kept it simple, re-introducing ourselves, saying why we like the property, and offering a little bit over asking price. We decided to address the letter to the agent and not the owner, as that was the protocol the agent set out. A proper Swiss doesn't deviate from the protocol and all that, especially in rural Heidiland.

Now we wait and see if we're the lucky ones. If we are, there will be many more questions coming!

[greenmount]

	Quote:	3Wishes
	Thanks again to everyone for the feedback and suggestions, both in threads and via PM. Thanks to TalkToYouLater for having a similar thread that happens to ask questions we've not thought about! Update: The offer letter is in the mail. We kept it simple, re-introducing ourselves, saying why we like the property, and offering a little bit over asking price. We decided to address the letter to the agent and not the owner, as that was the protocol the agent set out. A proper Swiss doesn't deviate from the protocol and all that, especially in rural Heidiland. Now we wait and see if we're the lucky ones. If we are, there will be many more questions coming!

I wish you the best of luck, dear 3Wishes family!

Really hope you'll be the lucky ones.

[magic]

	Quote:	greenmount
	I wish you the best of luck, dear 3Wishes family! Really hope you'll be the lucky ones.

Me too & please keep us updated

[3Wishes]

Update: It had been a while since we submitted our offer, so we contacted the agent on Monday. He said the owner had not decided yet and it was still wide open.

Then he emailed today to say we "didn't win the bid". He offered to keep us in mind if similar properties come up.

We weren't sure how to reply to the second bit. Is that sort of entering a contract for them to hunt for us or was the agent simply being polite?

We're disappointed, but at the same time we've learned a lot and are keeping our eyes open for another home that also suits. One advantage we have is that we're happy where we are. There's no rush to buy.

Still rooting for TTYL and his goat shed in the mountains.