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Old 22.01.2021, 14:11
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Re: Buying an house in Switzerland

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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.
Good point. I hadn't thought about that.

(Toodles off to check to see if the Key Club points we get for holding the mortgage - perhaps the only discernable benefit - are worth more or less than the payments...)
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Old 22.01.2021, 14:45
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Re: Buying an house in Switzerland

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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.
I thought they were written as 'bearer', so bank could be changed without any legal costs.
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Old 22.01.2021, 14:56
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Re: Buying an house in Switzerland

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I thought they were written as 'bearer', so bank could be changed without any legal costs.
Digital Schuldbriefe (Register Schuldbrief) are "named".
https://www.hev-schweiz.ch/eigentum/.../schuldbriefe/

Changing the name costs around CHF 50.
https://www.sz.ch/public/upload/assets/7361/213_512.pdf
https://www.notariate.zh.ch/deu/grun...ubigerwechsel/
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Old 22.01.2021, 19:11
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Re: Buying an house in Switzerland

I'm also in the process of buying somewhere, so below is a summary of what we've learned. Caveat is that this is for Geneva canton. Whilst there are some parts that are relevant throughout, for others there may be cantonal differences, so do ask.

Deposit: You need a minimum of 20%. Of that at least 10% MUST come from your own assets (cash, shares, donations from family, cashed-in pillar 3). You can make up the other 10% (or more if you want to go above 20% deposit) by using your occupational (pillar 2) pension.

Affordability: the banks/insurance companies providing you a mortgage will also want to know that you can afford payments and use a hypothetical interest rate of 5% to work it out. The % of your gross salary (and other incomes) should not exceed one third (there may be some leeway to go up a bit but try to stick below 33%).

Purchasing fees: now this is something that is definitely different across cantons, but you will likely need to pay some or all of the notary fees and associated taxes. In addition if you take out a mortgage, you also need to register the document with the notary, which also costs a fortune and (I think) has associated taxes. Anyway, all in all this can be around 5% of the purchase price.

Hope this is helpful - but just to stress, please check differences for your canton (although the 20% and the 5% for affordability are Swiss-wide)

Pledging: instead of cashing in your pensions (either occupational pillar 2 or your pillar 3 pensions) you can also pledge them. This means that you can get a mortgage with less than 20% physical deposit (e.g. 10% cash and 10% pledge) but it also means that your affordability calculation will be based on you being able to afford 5% interest rate at the (in this example) 90% mortgage (i.e. the money you don't have and the 10% you are pledging). There are tax benefits to doing this if you can.

Nominal rent and the logic of not paying off your mortgage: when you own a property you will be taxed on income you don't get. This took me quite a bit of time to get my head round. I can't give any real figures because I'm not a home owner yet, so I am completely making these next figures up for the benefit of explaining what this means. Let's say you earn 150k and the property that you buy has a nominal rental value of 25k per year (i.e. what you would get if you rented it out, which is decreased by 4% per year to a maximum of 40% reduction). This means that you are now taxed as if you are now earning 175k per year. And remember that tax rates go up exponentially, so at 150k you might be taxed at 20% on all your income (total 30k in taxes), but when you get up to 175k, you are taxed at 22.5% (total 39,375 in taxes). So your nominal rent is costing you 9,375 CHF in additional taxes. If you are not paying mortgage interest, you are still paying 9,375 CHF per year extra. But if you are paying interest, you can deduct that (as well as repairs and maintenance, although not something that increases the value of the property unless it is energy saving/green).
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  #45  
Old 22.01.2021, 20:36
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Re: Buying an house in Switzerland

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I'm also in the process of buying somewhere, so below is a summary of what we've learned. Caveat is that this is for Geneva canton. Whilst there are some parts that are relevant throughout, for others there may be cantonal differences, so do ask.

Deposit: You need a minimum of 20%. Of that at least 10% MUST come from your own assets (cash, shares, donations from family, cashed-in pillar 3). You can make up the other 10% (or more if you want to go above 20% deposit) by using your occupational (pillar 2) pension.

Affordability: the banks/insurance companies providing you a mortgage will also want to know that you can afford payments and use a hypothetical interest rate of 5% to work it out. The % of your gross salary (and other incomes) should not exceed one third (there may be some leeway to go up a bit but try to stick below 33%).

Purchasing fees: now this is something that is definitely different across cantons, but you will likely need to pay some or all of the notary fees and associated taxes. In addition if you take out a mortgage, you also need to register the document with the notary, which also costs a fortune and (I think) has associated taxes. Anyway, all in all this can be around 5% of the purchase price.

Hope this is helpful - but just to stress, please check differences for your canton (although the 20% and the 5% for affordability are Swiss-wide)

Pledging: instead of cashing in your pensions (either occupational pillar 2 or your pillar 3 pensions) you can also pledge them. This means that you can get a mortgage with less than 20% physical deposit (e.g. 10% cash and 10% pledge) but it also means that your affordability calculation will be based on you being able to afford 5% interest rate at the (in this example) 90% mortgage (i.e. the money you don't have and the 10% you are pledging). There are tax benefits to doing this if you can.

Nominal rent and the logic of not paying off your mortgage: when you own a property you will be taxed on income you don't get. This took me quite a bit of time to get my head round. I can't give any real figures because I'm not a home owner yet, so I am completely making these next figures up for the benefit of explaining what this means. Let's say you earn 150k and the property that you buy has a nominal rental value of 25k per year (i.e. what you would get if you rented it out, which is decreased by 4% per year to a maximum of 40% reduction). This means that you are now taxed as if you are now earning 175k per year. And remember that tax rates go up exponentially, so at 150k you might be taxed at 20% on all your income (total 30k in taxes), but when you get up to 175k, you are taxed at 22.5% (total 39,375 in taxes). So your nominal rent is costing you 9,375 CHF in additional taxes. If you are not paying mortgage interest, you are still paying 9,375 CHF per year extra. But if you are paying interest, you can deduct that (as well as repairs and maintenance, although not something that increases the value of the property unless it is energy saving/green).
A useful summary. At the risk of repeating myself, you need to decouple the nominal rent and the „logic“ of not paying your mortgage off.

Using your numbers and making an assumption on the purchase price and interest rates and deposit as follows:
Purchase price: CHF 900k
Deposit: 180k
Mortgage: 720k
Interest at 1%: 7.2k
Amortisation at 1%: 7.2k
Maintenance at 1% 7.2k
Property related outgoings: 21.6k

Tax calculation 150k + 25k - 7.2k (interest) - 7.2k (maintenance) = tax of 42.2k

Total outgoings 63.8k

Now let‘s assume you don‘t have the mortgage to pay (and to keep things equal, instead of paying the 1% amortisation you put it in a savings account)

Amortisation/Savings: 7.2k
Maintenance at 1%: 7.2k
Property related outgoings: 14.4k

Tax calculation 150k + 25k - 7.2k (maintenance) = tax 45.1k

Total outgoings 59.5k

Difference CHF 4.3k pa

NB for the tax calculations I just used Comparis and didn‘t make any deductions to the salary other than the ones above, so the tax to be paid is inflated, but this is just a worked example.
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  #46  
Old 22.01.2021, 22:41
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Re: Buying an house in Switzerland

I agree Eyebeebe that on that calculation, but a lot will depend on what your income level is and therefore what the difference in the tax rates are. Very few people would be in a position to pay off the size of mortgage that you need in Switzerland, and there is also something to be said for greater returns on investment outside of property with the money if you don't use it to pay off your mortgage.
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Old 22.01.2021, 23:17
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Re: Buying an house in Switzerland

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I agree Eyebeebe that on that calculation, but a lot will depend on what your income level is and therefore what the difference in the tax rates are. Very few people would be in a position to pay off the size of mortgage that you need in Switzerland, and there is also something to be said for greater returns on investment outside of property with the money if you don't use it to pay off your mortgage.
You are missing the point I am trying to make. There is a false belief that somehow keeping the mortgage alive and paying interest is cheaper than paying it off, because it has a tax benefit. Somehow this gets bundled with the imputed rental. Unless you have a marginal tax rate of over 100% (sucks to be you - I can‘t think of a situation where that occurs) this is not true. The difference between paying off and not paying off will differ depending on taxable income, marginal tax rate and interest rate you will always pay less if you pay off. Feel free to show an example where this doesn‘t hold true.

I agree that you can potentially get a better investment return than you mortgage rate, but it isn‘t a certainty.
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Old 23.01.2021, 09:24
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Re: Buying an house in Switzerland

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You are missing the point I am trying to make. There is a false belief that somehow keeping the mortgage alive and paying interest is cheaper than paying it off, because it has a tax benefit.
Not sure how others look at it, but for me, paying interest minus tax is still far far cheaper than paying rent.
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Old 23.01.2021, 10:26
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Re: Buying an house in Switzerland

The mortgage is the easy part these days. It's a seller's market right now, with hardly any single or double-family houses for sale in Zurich, Geneva or Zug agglomerates....unless your budget is upwards of 3.Mio . Ironically the pandemic has increased demand for home ownership.
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Old 23.01.2021, 10:53
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Re: Buying an house in Switzerland

What was said above plus one observation. The property brokers are not willing to negotiate the sell price in Switzerland compared to other countries that I know of and how it can be done. They won’t budge 5-10%. Probably due to seller’s market. So the price you see printed in e.g. Homegate.ch is the price you are expected to accept. They always say, I have more appointments and that there’s a long queue of potential buyers waiting. Then you see the same property on the market for months or years, unless it is real bargain

Any positive experience here?
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  #51  
Old 23.01.2021, 11:46
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Re: Buying an house in Switzerland

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What was said above plus one observation. The property brokers are not willing to negotiate the sell price in Switzerland compared to other countries that I know of and how it can be done. They won’t budge 5-10%. Probably due to seller’s market. So the price you see printed in e.g. Homegate.ch is the price you are expected to accept. They always say, I have more appointments and that there’s a long queue of potential buyers waiting. Then you see the same property on the market for months or years, unless it is real bargain

Any positive experience here?
Amusing story, a house had been on the market for 18 months, owned by an architect. No bids had been received in that time. I bid 70% of asking price, rejected after a couple of weeks thought. 6 months later house repossessed by Bank & sold for slightly less than my offer at auction.
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Old 23.01.2021, 11:51
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Re: Buying an house in Switzerland

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Not sure how others look at it, but for me, paying interest minus tax is still far far cheaper than paying rent.
Classic answer: It depends on the assumptions you use. You need to include the opportunity cost of using your savings for a deposit instead of investing it, not just look at the difference between the interest and maintenance and additional bills (you missed the 1% maintenance) and the rent.

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What was said above plus one observation. The property brokers are not willing to negotiate the sell price in Switzerland compared to other countries that I know of and how it can be done. They won’t budge 5-10%. Probably due to seller’s market. So the price you see printed in e.g. Homegate.ch is the price you are expected to accept. They always say, I have more appointments and that there’s a long queue of potential buyers waiting. Then you see the same property on the market for months or years, unless it is real bargain

Any positive experience here?
Yes, we were given the classic there are two other parties interested line, but then told that whoever offers 10% less than the asking price first gets it. We had already decided we wanted the place and were debating what to offer. We were advised by friends/colleagues to go lower still, but affordable properties in the area don‘t come up very often. I think it was quite a special case though as it is a 1970s build that had had little if any updating in the meantime. We could see the potential to make it how we wanted it, but it needed a lot of money spending on it. The original price reflected that. The reduction covered our overspend on items we hadn’t really planned to spend on.
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Old 23.01.2021, 12:59
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Re: Buying an house in Switzerland

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Amusing story, a house had been on the market for 18 months, owned by an architect. No bids had been received in that time. I bid 70% of asking price, rejected after a couple of weeks thought. 6 months later house repossessed by Bank & sold for slightly less than my offer at auction.
Still cannot comprehend what it is. Perhaps stubbornness on seller’s part and sheer determination to stick to the asking price. Maybe annoyance that the Swiss land or heritage will fall into paws of foreign residents, either pure greediness on agent’s part or simply I don’t care attitude (someone will eventually turn up and accept my offer).
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Old 23.01.2021, 13:13
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Re: Buying an house in Switzerland

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The mortgage is the easy part these days. It's a seller's market right now, with hardly any single or double-family houses for sale in Zurich, Geneva or Zug agglomerates....unless your budget is upwards of 3.Mio . Ironically the pandemic has increased demand for home ownership.
The pandemic also seems to have increased prices of second homes out in the middle of nowhere.

WFH, distancing, and the shutdowns have opened people's eyes to just how tiny the tiny spaces that are all that is commonly available to most of us really are. In 'before times', so much of our lives took place largely outside our homes, now that these tiny space must be turned into a school room and corporate officce as well as lived in by the whole family for a far greater portion of the day, people are fed up and looking for more space.

And space being the scarcest of commodities here, prices seem to be rising accordingly.
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Old 23.01.2021, 13:29
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Re: Buying an house in Switzerland

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Still cannot comprehend what it is. Perhaps stubbornness on seller’s part and sheer determination to stick to the asking price. Maybe annoyance that the Swiss land or heritage will fall into paws of foreign residents, either pure greediness on agent’s part or simply I don’t care attitude (someone will eventually turn up and accept my offer).
No idea really, but have seen a few over the years. There's one in the next village from us been totally renovated a couple of years ago now and still not sold. And I remember when we drive over the hills from Salavaux to Ins that there used to be a sign offering a house for sale which must have been up for a decade or more before it was taken down, presumably because it eventually sold.
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Old 23.01.2021, 13:37
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Re: Buying an house in Switzerland

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Still cannot comprehend what it is. Perhaps stubbornness on seller’s part and sheer determination to stick to the asking price. Maybe annoyance that the Swiss land or heritage will fall into paws of foreign residents, either pure greediness on agent’s part or simply I don’t care attitude (someone will eventually turn up and accept my offer).
My guess is that many home owners here simply do not have pressing need for the money, so there is not much motivation to lower prices for a quick sale as there often is elsewhere.

A typical attidue seems to be that if you don't need the money any time soon, why not sit tight until the price goes up another million or so? Even if only your grandchildren will benefit...
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Old 23.01.2021, 13:59
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Re: Buying an house in Switzerland

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My guess is that many home owners here simply do not have pressing need for the money, so there is not much motivation to lower prices for a quick sale as there often is elsewhere.

A typical attidue seems to be that if you don't need the money any time soon, why not sit tight until the price goes up another million or so? Even if only your grandchildren will benefit...
And if they‘ve owned it for a long time the mortgage will likely only be a small proportion of the market value and interest rates are super low, so the cost of holding is minimal vs. The upside of „the one“ paying your asking price.
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Old 23.01.2021, 17:31
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Re: Buying an house in Switzerland

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Still cannot comprehend what it is. Perhaps stubbornness on seller’s part and sheer determination to stick to the asking price. Maybe annoyance that the Swiss land or heritage will fall into paws of foreign residents, either pure greediness on agent’s part or simply I don’t care attitude (someone will eventually turn up and accept my offer).
He would have walked away with nothing, as his 'profit' was the 30% I didn't want to pay. He had wasted money on a horrible kitchen & bathroom which I valued at zero, he thought it was a hot love nest, just tacky as you would expect in AG
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Old 23.01.2021, 17:44
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Re: Buying an house in Switzerland

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Classic answer: It depends on the assumptions you use. You need to include the opportunity cost of using your savings for a deposit instead of investing it, not just look at the difference between the interest and maintenance and additional bills (you missed the 1% maintenance) and the rent.
well, the interest I pay + maintenance - tax savings is far cheaper than rent I would have paid. If you want to bring opportunity cost into the argument, then I would compare that to the appreciation of the house. Sure owning a property is a lot less liquid and tied to gearing, but the appreciation I had is a lot higher than the best index funds. I agree with you though that everything depends on the assumptions and there are so many other things involved, but to address your point about the tax savings being a fallacy because interest must still be paid, my answer to that is simply that it is still far a better option than paying rent.

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Amusing story, a house had been on the market for 18 months, owned by an architect. No bids had been received in that time. I bid 70% of asking price, rejected after a couple of weeks thought. 6 months later house repossessed by Bank & sold for slightly less than my offer at auction.
My guess here is that the bank was closing in on the property anyway so the seller was having a last throw of the dice with potential buyers. Either they get to sell it for full price or the banks will take it. No other choice...
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Old 23.01.2021, 18:10
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Re: Buying an house in Switzerland

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Not sure how others look at it, but for me, paying interest minus tax is still far far cheaper than paying rent.
It's not a matter how you "look at it" - you need to calculate and all the variables around it. Eyebebee example clearly shows that it could be the other way around and I believe a lot of people are falsely led to believe mortgage is always better.
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