Go Back   English Forum Switzerland > Help & tips > Housing in general  
Reply
 
Thread Tools Display Modes
  #1  
Old 04.10.2020, 09:08
Newbie 1st class
 
Join Date: Apr 2020
Location: Zurich
Posts: 15
Groaned at 0 Times in 0 Posts
Thanked 0 Times in 0 Posts
CPDM has no particular reputation at present
Pre payment on your mortgage

dear all,

From basics of property purchases,,, learnt , one needs to pay 20% upfront and then add additional 15% to reach to total of 35% of property value in 10 years.
Wondering do we need to make a common understanding if any prepayments can be made prior to 10 years ? (after the initial 20% payment)?

Ie, pay 20% but then say we want to speed up remaining 15% and say wish to close it 5 yrs... is that possible?
Reply With Quote
  #2  
Old 04.10.2020, 09:34
Island Monkey's Avatar
Forum Legend
 
Join Date: Mar 2008
Location: Wallis
Posts: 5,905
Groaned at 99 Times in 64 Posts
Thanked 6,609 Times in 2,993 Posts
Island Monkey has a reputation beyond reputeIsland Monkey has a reputation beyond reputeIsland Monkey has a reputation beyond reputeIsland Monkey has a reputation beyond reputeIsland Monkey has a reputation beyond reputeIsland Monkey has a reputation beyond repute
Re: Pre payment on your mortgae

Iíve never heard about that 15% in ten years I seriously hope thatís not true!
Reply With Quote
  #3  
Old 04.10.2020, 09:43
Guest
 
Posts: n/a
Re: Pre payment on your mortgae

It's fairly standard. Many banks do indeed require that the mortgagor hold around 35% equity (usually based on the purchase price) within a given period. If the initial deposit is less than 35%, the mortgagor will consequently be required to pay a small amount of principal (amortization) with each interest payment. Often this goes almost unnoticedócheck your home loan statement for details.

OP, ask your lender. In my case, the bank (UBS) was very happy to accept a lump sum amortization payment years after I took the loan out, to bring the loan amount to no less than 65% of the purchase price.
Reply With Quote
  #4  
Old 04.10.2020, 09:47
Island Monkey's Avatar
Forum Legend
 
Join Date: Mar 2008
Location: Wallis
Posts: 5,905
Groaned at 99 Times in 64 Posts
Thanked 6,609 Times in 2,993 Posts
Island Monkey has a reputation beyond reputeIsland Monkey has a reputation beyond reputeIsland Monkey has a reputation beyond reputeIsland Monkey has a reputation beyond reputeIsland Monkey has a reputation beyond reputeIsland Monkey has a reputation beyond repute
Re: Pre payment on your mortgae

So what I understand is my normal mortgage amortisation payments are for this? I donít suddenly have to find another 15% ?
Reply With Quote
  #5  
Old 04.10.2020, 10:03
roegner's Avatar
Moderately Dutch
 
Join Date: May 2011
Location: Zurich
Posts: 11,112
Groaned at 369 Times in 310 Posts
Thanked 14,047 Times in 6,537 Posts
roegner has a reputation beyond reputeroegner has a reputation beyond reputeroegner has a reputation beyond reputeroegner has a reputation beyond reputeroegner has a reputation beyond reputeroegner has a reputation beyond repute
Re: Pre payment on your mortgae

Quote:
View Post
So what I understand is my normal mortgage amortisation payments are for this? I donít suddenly have to find another 15% ?
If after 15 years you have paid back the required amount of money, you are good to go. You can check what percentage amortisation you have and if that leads to the required amount?
Reply With Quote
  #6  
Old 04.10.2020, 10:30
st2lemans's Avatar
Forum Legend
 
Join Date: Dec 2010
Location: Lugano
Posts: 31,810
Groaned at 2,373 Times in 1,727 Posts
Thanked 38,781 Times in 18,270 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: Pre payment on your mortgae

Quote:
It's fairly standard. Many banks do indeed require that the mortgagor hold around 35% equity (usually based on the purchase price) within a given period. If the initial deposit is less than 35%, the mortgagor will consequently be required to pay a small amount of principal (amortization) with each interest payment. Often this goes almost unnoticedócheck your home loan statement for details.
We have 30% equity, and only pay a low rate interest only mortgage. I guess that the bank thinks that it is worth more than we paid (they even offered to lend us more).

Tom
Reply With Quote
The following 2 users would like to thank st2lemans for this useful post:
  #7  
Old 04.10.2020, 11:20
NotAllThere's Avatar
Forum Legend
 
Join Date: Oct 2008
Location: Baselland
Posts: 13,669
Groaned at 237 Times in 208 Posts
Thanked 20,087 Times in 8,161 Posts
NotAllThere has a reputation beyond reputeNotAllThere has a reputation beyond reputeNotAllThere has a reputation beyond reputeNotAllThere has a reputation beyond reputeNotAllThere has a reputation beyond reputeNotAllThere has a reputation beyond repute
Re: Pre payment on your mortgae

Quote:
View Post
We have 30% equity, and only pay a low rate interest only mortgage. I guess that the bank thinks that it is worth more than we paid (they even offered to lend us more).

Tom
That was certainly our case when we remortgaged after five years. We went from 20% to 40%! We only recently ended all amortisation of the loan.

For the OP - I had four fixed rate mortgages, with different periods for each tranche. As a mortgage ended, I renewed it, usually for less and paying off a portion. What matters is the length of your mortgage agreement. If you plan to pay it down in 5 years, don't get a mortgage that's longer than 5 years.
Reply With Quote
The following 2 users would like to thank NotAllThere for this useful post:
  #8  
Old 04.10.2020, 12:13
Forum Veteran
 
Join Date: Jan 2016
Location: Lugano
Posts: 1,116
Groaned at 17 Times in 15 Posts
Thanked 1,343 Times in 614 Posts
LuganoPirate has a reputation beyond reputeLuganoPirate has a reputation beyond reputeLuganoPirate has a reputation beyond reputeLuganoPirate has a reputation beyond repute
Re: Pre payment on your mortgae

A bank will usually lend 80% of their valuation, which is often 10 - 15% below the market valuation. A mortgage is then given on the 80% for a fixed term curently +- 1%. For the difference they set up a second mortgage which is at a higher rate, ie. their standard variable mortgage rate, which in the case of Raiffeisen is currently 2.625%. This has to be repaid within 15 years but can be payed down or off at any time.

This second part can also be converted to a fixed term, if for example you make renovations or improvements which substantially increase the property's value, for instance by adding another floor, a garage etc. As long as the valuations (and your income ratio) stack up, the bank will often finance this at the standard rate and when finished convert all the loans into a fixed term loan.
Reply With Quote
  #9  
Old 04.10.2020, 14:52
Guest
 
Posts: n/a
Re: Pre payment on your mortgae

Quote:
View Post
if i take a loan for 10 years... can i make pre payments , like can i pay lumpsum as and when i have access money ? or the annual payments are frozen once mortgage agreement is made?
.
Quote:
OP, ask your lender. In my case, the bank (UBS) was very happy to accept a lump sum amortization payment years after I took the loan out, to bring the loan amount to no less than 65% of the purchase price.
Reply With Quote
This user would like to thank for this useful post:
  #10  
Old 04.10.2020, 15:08
Newbie 1st class
 
Join Date: Sep 2020
Location: Central
Posts: 17
Groaned at 0 Times in 0 Posts
Thanked 6 Times in 5 Posts
KashKau has no particular reputation at present
Re: Pre payment on your mortgae

Quote:
View Post
dear all,

From basics of property purchases,,, learnt , one needs to pay 20% upfront and then add additional 15% to reach to total of 35% of property value in 10 years.
Wondering do we need to make a common understanding if any prepayments can be made prior to 10 years ? (after the initial 20% payment)?

Ie, pay 20% but then say we want to speed up remaining 15% and say wish to close it 5 yrs... is that possible?
You can prepay however much you want but only when your current fix mortgage runs out. While it's running all cash flows are contractually fixed and you even will be *penalized* for repaying early


The general rule is your mortgage should be max 65% of bank's valuation at 15 years of ownership, and it gets correspondingly linearly interpolated at earlier years. If you borrowed >80% due to pledging extra assets, you will have higher amortization. If you borrowed <80%, you will have less. But all this only matters when you sign up for a new mortgage / refinance - they have to reassess risk and rerun calculations then. Bank's valuation can change. Renovations can change valuation too. Ask the bank when it's time to refinance, until that point there's little point in doing anything about your current mortgage
Reply With Quote
  #11  
Old 04.10.2020, 15:14
roegner's Avatar
Moderately Dutch
 
Join Date: May 2011
Location: Zurich
Posts: 11,112
Groaned at 369 Times in 310 Posts
Thanked 14,047 Times in 6,537 Posts
roegner has a reputation beyond reputeroegner has a reputation beyond reputeroegner has a reputation beyond reputeroegner has a reputation beyond reputeroegner has a reputation beyond reputeroegner has a reputation beyond repute
Re: Pre payment on your mortgae

Quote:
View Post
You can prepay however much you want but only when your current fix mortgage runs out. While it's running all cash flows are contractually fixed and you even will be *penalized* for repaying early
Unless you agree differently with your bank
Reply With Quote
The following 3 users would like to thank roegner for this useful post:
  #12  
Old 04.10.2020, 15:21
Newbie 1st class
 
Join Date: Sep 2020
Location: Central
Posts: 17
Groaned at 0 Times in 0 Posts
Thanked 6 Times in 5 Posts
KashKau has no particular reputation at present
Re: Pre payment on your mortgae

Quote:
View Post
Unless you agree differently with your bank
In principle yes. But I don't really see a case where they would agree to let you repay a meaningful amount of a fix mortgage penalty-free. They got you on the hook for interest + penalty (-0.xx%), waiving that will result in a loss to the bank. You can try negotiating towards longer duration and higher amounts, which does not generate a loss to them, but not much the other way
Reply With Quote
  #13  
Old 04.10.2020, 15:35
Guest
 
Posts: n/a
Re: Pre payment on your mortgae

Quote:
View Post
In principle yes. But I don't really see a case where they would agree to let you repay a meaningful amount of a fix mortgage penalty-free. They got you on the hook for interest + penalty (-0.xx%), waiving that will result in a loss to the bank. You can try negotiating towards longer duration and higher amounts, which does not generate a loss to them, but not much the other way
Banks in Switzerland also have to be mindful of the restrictions and lending ratios that are imposed upon them (which are strictly monitored in the wake of the UBS fiasco), so they generally will accept lump sum amortizations if they are required to bring lending ratios back into shape. As I wrote, my lender was happy to accept a lump sum payment and that was while.the entire amount outstanding was contracted with fixed terms. The lump.sum was quite small, though, as my initial deposit was about 33%. I paid it about four years into the loan.
Reply With Quote
  #14  
Old 04.10.2020, 15:44
3Wishes's Avatar
Moderately Amused
 
Join Date: Jul 2010
Location: Bern area
Posts: 11,161
Groaned at 88 Times in 84 Posts
Thanked 18,947 Times in 8,433 Posts
3Wishes has a reputation beyond repute3Wishes has a reputation beyond repute3Wishes has a reputation beyond repute3Wishes has a reputation beyond repute3Wishes has a reputation beyond repute3Wishes has a reputation beyond repute
Re: Pre payment on your mortgae

So the moral of the story is:

If you think you'll prepay some or all of the outstanding balance during the loan, make sure you understand what's written in your contract in terms of early payment penalties (if any). Every mortgage is different so there's no one blanket answer.

Right?
Reply With Quote
The following 5 users would like to thank 3Wishes for this useful post:
Reply

Tags
mortgage contract, prepayment




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
Mortgage? Which bank offers the best mortgage rates? fashionister Finance/banking/taxation 48 28.02.2021 16:17
Orange payment slip payment from abroad immie Finance/banking/taxation 13 15.01.2015 13:23
Oh, Mortgage .... userlena Housing in general 73 19.01.2013 21:53
Mortgage nancyblue Housing in general 13 21.09.2010 09:43
Mortgage Interest Payment dmarkd Finance/banking/taxation 4 31.01.2008 21:55


All times are GMT +2. The time now is 18:08.


Powered by vBulletin® Version 3.8.4
Copyright ©2000 - 2021, Jelsoft Enterprises Ltd.
LinkBacks Enabled by vBSEO 3.1.0