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  #21  
Old 21.01.2021, 22:48
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Re: Buying an house in Switzerland

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While it isn‘t what most people do, there is nothing to stop you amortising the mortgage just like you would in other countries. The bank‘s don‘t like you doing it, as they much prefer to have you pay interest in perpetuity.

There are tax benefits from having the loan, in so far as the interest is tax deductible, however it‘s a fallacy to think this saves you money, as you still have to pay the interest.

As mentioned by someone else, the advantage this system brings is that you should be able to generate a better investment return from the equity market than the interest is costing you. This is obviously not guaranteed.
I'm paying part of the mortgage off and part into the stock market. It feels really stupid to pay off a <1% mortgage, but with sky high stock valuations, I want to hedge my bets a bit!
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  #22  
Old 21.01.2021, 22:49
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Re: Buying an house in Switzerland

Absolutely. That said it could take me at least 5 years should I ever want or need to sell my house. So you better make sure you want to stay!
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  #23  
Old 21.01.2021, 22:51
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Re: Buying an house in Switzerland

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I'm paying part of the mortgage off and part into the stock market. It feels really stupid to pay off a <1% mortgage, but with sky high stock valuations, I want to hedge my bets a bit!
Would it not be better to put the non-equity cash into bonds ?
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  #24  
Old 21.01.2021, 23:11
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Re: Buying an house in Switzerland

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Tax advantages having a loan?
The loan value is normally several times the tax value of the house, so it is a negative asset for tax purposes.

Tom
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  #25  
Old 22.01.2021, 09:23
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Re: Buying an house in Switzerland

Asking for a friend... What about people with CdL permits? They don't do tax return, so this benefit is not there. I wonder if it is worth buying property for them?

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The loan value is normally several times the tax value of the house, so it is a negative asset for tax purposes.

Tom
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  #26  
Old 22.01.2021, 09:36
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Re: Buying an house in Switzerland

Beware of long-term mortgage deals. If you have one for 10 years and sell up and leave the country after 5 years, the bank will be looking for the 5 years they lost and will try and bill you for it...
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  #27  
Old 22.01.2021, 09:59
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Re: Buying an house in Switzerland

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Where people save money is when the interest and any amortisation is less than you would pay in rent.

We likely could rent our home for two to three times what we pay in interest.
Not exactly. Amortisation is transferring your own cash into your own equity.

You need to compare mortgage interest, maintenance costs and fees with warm rent to see if you are saving money. If you are inclined towards financial investments, you also need to add in the opportunity cost lost if you were to invest the amortisation amount into the markets.

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The loan value is normally several times the tax value of the house, so it is a negative asset for tax purposes.

Tom
Several times, seems excessive. Maybe that‘s the case in the Ticinese paradise. For the vast majority of people wealth tax is an irrelevance and can be offset with wealth management deductions.
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  #28  
Old 22.01.2021, 10:21
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Re: Buying an house in Switzerland

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Asking for a friend... What about people with CdL permits? They don't do tax return, so this benefit is not there. I wonder if it is worth buying property for them?
The question goes to whether you see home ownership as a good in and of itself.

Our case is different from yours, for us it is thanks to the intersection of the Swiss and US tax systems. Bottom line, we get no tax benefit from owning our property in Switzerland.

Yet I would never go back to renting. First and foremost, I do see home ownership as a good in itself, irrespective of the financial end. I simply cannot live without owning the ground beneath my feet, just not wired that way.

But that aside, depending on your individual situation, ownership could be less expensive than renting. Our quarterly mortgage payment is about the price of a halfway decent dinner out, whereas rent was exorbitant. So that's a savings.

One reason that our mortgage payment is so low is that, contrary to received wisdom, we have paid the mortgage down. The only reason we even keep this tiny tranche is that we've been advised to keep the Schuldbrief open to facilitate selling.

But even if we hadn't paid the mortgage down our payments would still have been less than rent. Not as dramatic a savings, but a savings nonetheless.

Unless you are stretching yourself to the absolute limit, buying a mansion when you've been renting a cubbyhole, at current rates a mortgage payment is usually less than rent.

(Be aware, however, that to qualify for a loan you'll be assessed using a rate that is quite a bit higher, and of course there are the usual costs of running a house to factor in.)

You really have to look at the whole financial picture in light of your own individual goals, outlook, alternative options. Tax savings on a mortgage are only one piece of the puzzle.
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  #29  
Old 22.01.2021, 10:55
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Re: Buying an house in Switzerland

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Several times, seems excessive. Maybe that‘s the case in the Ticinese paradise.
In my case it is a multiple of 10. Guess that means I paid too much
Ok the loan value is a multiple of 5 - but still....
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  #30  
Old 22.01.2021, 10:56
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Re: Buying an house in Switzerland

Appreciate your response. I came from a country where home ownership is normal and expected thing. It is in my blood too, so I am completely with you on this point.

I can imagine for a regular CH resident it is not an easy decision to make, but adding another dimension of being on CdL makes a complete mess in my mind

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The question goes to whether you see home ownership as a good in and of itself.

Our case is different from yours, for us it is thanks to the intersection of the Swiss and US tax systems. Bottom line, we get no tax benefit from owning our property in Switzerland.

Yet I would never go back to renting. First and foremost, I do see home ownership as a good in itself, irrespective of the financial end. I simply cannot live without owning the ground beneath my feet, just not wired that way.

But that aside, depending on your individual situation, ownership could be less expensive than renting. Our quarterly mortgage payment is about the price of a halfway decent dinner out, whereas rent was exorbitant. So that's a savings.

One reason that our mortgage payment is so low is that, contrary to received wisdom, we have paid the mortgage down. The only reason we even keep this tiny tranche is that we've been advised to keep the Schuldbrief open to facilitate selling.

But even if we hadn't paid the mortgage down our payments would still have been less than rent. Not as dramatic a savings, but a savings nonetheless.

Unless you are stretching yourself to the absolute limit, buying a mansion when you've been renting a cubbyhole, at current rates a mortgage payment is usually less than rent.

(Be aware, however, that to qualify for a loan you'll be assessed using a rate that is quite a bit higher, and of course there are the usual costs of running a house to factor in.)

You really have to look at the whole financial picture in light of your own individual goals, outlook, alternative options. Tax savings on a mortgage are only one piece of the puzzle.
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  #31  
Old 22.01.2021, 11:04
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Re: Buying an house in Switzerland

The first thing I said to the bank when I had the mortgage meeting was

"Look, I understand, but I am Italian and we will do it the Italian way. Finito."

And so it was...
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  #32  
Old 22.01.2021, 11:09
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Re: Buying an house in Switzerland

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The first thing I said to the bank when I had the mortgage meeting was

"Look, I understand, but I am Italian and we will do it the Italian way. Finito."

And so it was...
Was their answer ‘go back to Italy then’ or ‘no problem sir, your special rate will be 15%’?

What’s your point exactly?
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  #33  
Old 22.01.2021, 11:18
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Re: Buying an house in Switzerland

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Was their answer ‘go back to Italy then’ or ‘no problem sir, your special rate will be 15%’?

What’s your point exactly?
It was a no problem sir, sort of.
It's to give an example in the thread, to the thread starter (who sounds italian), that there is no problem at all to do it as it is normal in other countries.
The bank will push you to the way they like it, but they will also accept full amortization in the amount of time you want.

It is a possibility for simple people like me, who are not expert in investing and simply would like to own a property.
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  #34  
Old 22.01.2021, 11:37
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Re: Buying an house in Switzerland

The best part of buying a house in Switzerland is afterwards you don't have to perpetually wonder if it is the right thing to do.
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  #35  
Old 22.01.2021, 11:41
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Re: Buying an house in Switzerland

I have spoken to a few people who have purchased houses here, i heard from a few people that they didn't put down the full 20%.

Is that even possible? I was always under the impression that it should be the full 20% or more and not less then that?

Anyone had this experience before? Can you even put less then a 20% deposit down?

Thanks
K
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  #36  
Old 22.01.2021, 11:45
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Re: Buying an house in Switzerland

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I have spoken to a few people who have purchased houses here, i heard from a few people that they didn't put down the full 20%.

Is that even possible? I was always under the impression that it should be the full 20% or more and not less then that?

Anyone had this experience before? Can you even put less then a 20% deposit down?

Thanks
K
Yes, you can pledge parts of your 2nd/3rd pillar.
You don't necessarily need the 20% in cold cash (I believe 10% is strictly necessary, but others will know more).
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  #37  
Old 22.01.2021, 11:52
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Re: Buying an house in Switzerland

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While it isn‘t what most people do, there is nothing to stop you amortising the mortgage just like you would in other countries. The bank‘s don‘t like you doing it, as they much prefer to have you pay interest in perpetuity.

There are tax benefits from having the loan, in so far as the interest is tax deductible, however it‘s a fallacy to think this saves you money, as you still have to pay the interest.

As mentioned by someone else, the advantage this system brings is that you should be able to generate a better investment return from the equity market than the interest is costing you. This is obviously not guaranteed.
The debt shield fallacy championed by the bank managers sporting a classic Swiss watch in order to instil ‘trust and confidence’.
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  #38  
Old 22.01.2021, 12:34
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Re: Buying an house in Switzerland

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I have spoken to a few people who have purchased houses here, i heard from a few people that they didn't put down the full 20%.

Is that even possible? I was always under the impression that it should be the full 20% or more and not less then that?

Anyone had this experience before? Can you even put less then a 20% deposit down?

Thanks
K
We built 4 years ago and our bank were prepared to offer us I think an 84% mortgage - which we didn't take. This surprised me because of the 20% rule but it seems they had some leeway. We went with the usual 80% mortgage in the end.
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  #39  
Old 22.01.2021, 13:43
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Re: Buying an house in Switzerland

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Yes, you can pledge parts of your 2nd/3rd pillar.
You don't necessarily need the 20% in cold cash (I believe 10% is strictly necessary, but others will know more).
Pillar 2 is not considered as "hard cold cash" and will not count toward the 10%.
Pillar 3a and obviously the part of pillar 3b which is hard cold cash, is hard cold cash. Be aware that if you have a life insurance 3a or an investment saving plan that you might only get 60 to 75% back if you have to liquidate it, whereas in a saving account 3a or own invested 3a funds (VIAC, etc.) you can get 100%. AFAIK the 10% of hard cold cash cannot be pledged but.

The 20% of self financing also depends on the mortgage amount vs. the evaluation by the bank. If the bank values the house higher you can get a higher mortgage. If the bank values the house lower you must bring more of your own money. Be aware that if houses prices fall you might have to secure the mortgage with additional funds. Read the fine print of your mortgage contract and have a emergency funds ready in case the market situation rapidly changes.
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  #40  
Old 22.01.2021, 13:47
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Re: Buying an house in Switzerland

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The only reason we even keep this tiny tranche is that we've been advised to keep the Schuldbrief open to facilitate selling.
Can't you pay all and than simply transfer the Schuldbrief in your name? In these days with the digital Schuldbrief there is no longer a risk that you might lose it.
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