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Old 23.11.2022, 23:33
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Mortgage, life insurance vs 3a

Hello all,
I would like to have some advice and opinions from people who had experience or heared about the bellow topic:
I am thinking to buy a house through a mortgage by pledge of my pension fund.
The bank told me the bellow:

CHF 10’600 repayment per year, directly (mortgage decreases year after year) OR directly and indirectly through 3a accounts / policies (7000 p.a, from 2023 on) 7k + 3.6k)

In that case pledge of my pension fund needed

I would have to take out a life term insurance policy to cover the amounts that are pledged from my mortgage.

Alternative: If instead of make the indirect amortization through a 3a account I do it through a 3a policy, it is almost sure that the insurance sum in the event of death will be high enough to cover the amounts pledged from my pension fund. If I choose this option I would then need to see the quotes that the insurance company would send to me.

My question is wich one is better to choose?
Any similar experience from some of you , or please share some knowledge.
Thanks

Last edited by MarkNow; 24.11.2022 at 00:09.
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Old 24.11.2022, 09:45
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Re: Mortgage, life insurance vs 3a

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Hello all,
I would like to have some advice and opinions from people who had experience or heared about the bellow topic:
I am thinking to buy a house through a mortgage by pledge of my pension fund.
The bank told me the bellow:

CHF 10’600 repayment per year, directly (mortgage decreases year after year) OR directly and indirectly through 3a accounts / policies (7000 p.a, from 2023 on) 7k + 3.6k)

In that case pledge of my pension fund needed

I would have to take out a life term insurance policy to cover the amounts that are pledged from my mortgage.

Alternative: If instead of make the indirect amortization through a 3a account I do it through a 3a policy, it is almost sure that the insurance sum in the event of death will be high enough to cover the amounts pledged from my pension fund. If I choose this option I would then need to see the quotes that the insurance company would send to me.

My question is wich one is better to choose?
Any similar experience from some of you , or please share some knowledge.
Thanks
Going for the 3a proposal rather than direct repayments should save you some tax. I doubt the bank would take the 3a each year, and you would be expected to pay it in once the mortgage matures. Often the 3a account would be with the bank lending you the mortgage anyway.

I would go for the 3a account rather than 3a insurance policy option. These are normally locked in until retirement and expensive to get out of. One presumes you will have amortised enough on the house before retirement so will want the freedom to choose what to do with your 3rd pillar after this rather than being stuck with an insurance policy.
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Old 24.11.2022, 10:06
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Re: Mortgage, life insurance vs 3a

Avoid the hassle and just do direct amortization.
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Old 24.11.2022, 11:08
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Re: Mortgage, life insurance vs 3a

I just had a meeting again with the bank and of course they are the ones that can give answers. But since they also wan to to sell and they talk "bank" language it is very helpful to hear a second advice.

So far of what i understood I have two options:

1. 3a account to the same bank (but with an additional life insurance). As a direct amortization payment

2. OR 3a policy from any insurance that includes the life insurance

Also the bank proposed me the first option as the best one.
The only think I didn't understand is that also in first option I would still have to pay a life insurance for the pledged amount of my pension.

Thanks for your effort to give me any replies!
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Old 24.11.2022, 11:16
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Re: Mortgage, life insurance vs 3a

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I just had a meeting again with the bank and of course they are the ones that can give answers. But since they also wan to to sell and they talk "bank" language it is very helpful to hear a second advice.

So far of what i understood I have two options:

1. 3a account to the same bank (but with an additional life insurance). As a direct amortization payment

2. OR 3a policy from any insurance that includes the life insurance

Also the bank proposed me the first option as the best one.
The only think I didn't understand is that also in first option I would still have to pay a life insurance for the pledged amount of my pension.

Thanks for your effort to give me any replies!
You also have a 3rd option of direct amortization (with life insurance policy) as Phil_MCR says. You don't have to use your 3rd pillar.

If you pledge your pension you still need to take out a separate life insurance policy, you can check the different offers via comparis. I'm sure a broker will be all too happy to come to your house and sell you more than you need on top too

Option 1 or 3 are the best and I would avoid option 2.
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Old 24.11.2022, 12:22
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Re: Mortgage, life insurance vs 3a

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I doubt the bank would take the 3a each year
By law, you can use the money in your pillar 3a every five years to finance your self lived in real estate. If you are a couple, and the bank allows (or you setup you mortgage structure accordingly), you can reduce your mortgage every 5 years by ~70 k and profit from the tax credit. This is one of the most lucrative use of pillar 3a.
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Old 24.11.2022, 13:40
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Re: Mortgage, life insurance vs 3a

Thank you all for the replies. It looks that I will go with option 1. Now I have to search comparis and tolerate insurance sellers
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Old 24.11.2022, 16:47
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Re: Mortgage, life insurance vs 3a

Actually there is also another option (without pledges) but whole withdrawal of my pension fund. This wont need a 3a pillar or life insurance.
Any thoughts here?
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Old 26.11.2022, 19:15
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Re: Mortgage, life insurance vs 3a

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Actually there is also another option (without pledges) but whole withdrawal of my pension fund. This wont need a 3a pillar or life insurance.
Any thoughts here?
I wouldn't withdraw all of my pension to buy a house when pledging it will work instead, but maybe that's me. The whole point is I have money for retirement, not that it's tied up in an illiquid asset.
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Old 26.11.2022, 20:58
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Re: Mortgage, life insurance vs 3a

A lot depends on the age of OP, how much the house costs, how much he has in the various pillars and how much he earns and how much disposable income he have after everything is paid.
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Old 26.11.2022, 21:19
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Re: Mortgage, life insurance vs 3a

Here the topic in a nutshell:

Financing home ownership with retirement capital:

https://www.ubs.com/ch/en/private/mo...ion-money.html
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Old 26.11.2022, 21:41
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Re: Mortgage, life insurance vs 3a

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A lot depends on the age of OP, how much the house costs, how much he has in the various pillars and how much he earns and how much disposable income he have after everything is paid.

And how much they have in invested assets already in pillar 2. As well as their secured income after retirement from pillar 1.

@ OP. For background: I see from your previous threads that you have been looking for ways to take out all the assets from your Pillar 2 account (moving country etc.). Are you still resident in Switzerland, and do you hold retirement assets other than your Pillar 3a accounts?

Are you also eligible for retirement assets from a Pillar 1 account (or equivalent) following retirement age?
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