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  #21  
Old 22.06.2009, 10:50
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Re: buying Vs renting

Another thing to consider - you can take a mortgage out in tranches. We chose a mix of fixed and floating rates, for varying time periods, that gives us more flexibility to take advantage of interest rate changes.

When I look at all our housing related expenses owning has proven to be less than half the cost of renting.

YMMV.

And no evil landlord breathing down my neck.
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  #22  
Old 22.06.2009, 11:04
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Re: buying Vs renting

We are thinking of staying here long term, what really worries me about buying is that we will still have to pay a mortgage when we retire plus the statutory medical insurance. Not having contributed much into the Swiss social system, I wonder whether we will have enough funds to have a reasonable retirement.
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  #23  
Old 22.06.2009, 12:08
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Re: buying Vs renting

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We are thinking of staying here long term, what really worries me about buying is that we will still have to pay a mortgage when we retire plus the statutory medical insurance. Not having contributed much into the Swiss social system, I wonder whether we will have enough funds to have a reasonable retirement.
If you were renting, you would still have to pay rent when you retire. However, say you are retiring in 20 years... your rent would probably be double what it is now due to inflation and would be even more if interests rates go up, but your mortgage is tied to the interest rates only.
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Old 22.06.2009, 12:19
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Re: buying Vs renting

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If you were renting, you would still have to pay rent when you retire. However, say you are retiring in 20 years... your rent would probably be double what it is now due to inflation and would be even more if interests rates go up, but your mortgage is tied to the interest rates only.
Axman I appreciate what you say, but being a Brit, I am taking a UK approach of having your mortgage paid when you retire, the Swiss system as far as I can see doesnt allow this. What would be the situation if at 80 years old, funds run out. Do the reprocess and throw you on the streets.
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  #25  
Old 22.06.2009, 12:46
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Re: buying Vs renting

Telandy,

There is no reason why you can't pay off a mortgage if you wish to.

I'd rather have a little extra money accumulating in an account in my name than being forked over to the bank every month - that's the beauty the Swiss 'interest only' mortgage. As long as it is in our best interest to carry the mortgage we do so - but when we are better off without the debt (mortgage rate rise, change in tax treatment, change in personal circumstances), we pay off a chunk as a tranche rolls over.

Talk to your banker - there are lots of ways to approach the financial side.

Whether a home purchase is right for you really relies on individual goals, circumstances, and alternatives.


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...but being a Brit, I am taking a UK approach of having your mortgage paid when you retire, the Swiss system as far as I can see doesnt allow this...
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  #26  
Old 22.06.2009, 12:53
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Re: buying Vs renting

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Axman I appreciate what you say, but being a Brit, I am taking a UK approach of having your mortgage paid when you retire, the Swiss system as far as I can see doesnt allow this. What would be the situation if at 80 years old, funds run out. Do the reprocess and throw you on the streets.
There is nothing stopping you paying more than the normal repayments to have your house paid off when you retire. Our repayment agreement is around 10k a year and we can pay more if we want to. There is no big advantage to paying off your loan because of weath taxes. Zug wealth taxes are about the same as our Swiss mortgage rate. Paying off our UK mortgages makes much more sense.
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  #27  
Old 22.06.2009, 13:34
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Re: buying Vs renting

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Axman I appreciate what you say, but being a Brit, I am taking a UK approach of having your mortgage paid when you retire, the Swiss system as far as I can see doesnt allow this. What would be the situation if at 80 years old, funds run out. Do the reprocess and throw you on the streets.
I understand completely, being a non-swiss. I was also surprised at first when I found out that you don't have to repay principal. But it doesn't mean that you don't have to, as MarieZug and Meloncollie have pointed out.

In fact, when I refinanced last year, the value of our place has appreciated so much that we qualify to have the whole mortgage as an interest only type. I was somewhat sceptical, but the bank suggested that instead of repaying principal, we should open 3rd pillar accounts and other accounts, i.e., so that we would also have some liquidity. When we retire, we can choose to repay the whole thing from our 3rd pillar accounts. It makes sense for us right now, but when interest rates change we might change again. Best thing to do is talk to your bank.
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  #28  
Old 22.06.2009, 13:47
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Re: buying Vs renting

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Best thing to do is talk to your bank.
Quite agree you should talk to your bank.

But another thing to consider is lifestyle. Finance is obviously important when you buy a place, but so is how you live. Now that we have bought a place I love knowing I can do whatever I like to it without getting anyone's permission and without having to change it back when we leave.

For example I hate flies. Both where we live now and where we rented earlier have many many flies - i asked the landlord about flyscreens at our previous place and he said it was fine as long as paid for them and then took them with us when we left. Not ideal obviously. Here we are having them installed and I know they are just part of the place when we sell it again. I have painted walls, we have re done the garden - all to our liking. Didn't have to ask anyone, don't have to change it before we leave. Happy days!

On top of all the freedom, our monthly mortage repayment is significantly less than our rental was, our place is bigger and much nicer, and yes we are paying back more than just interest, so slowly we are owning more and more.

All good.
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  #29  
Old 24.06.2009, 16:38
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Re: buying Vs renting

For now I would say renting. There is a high probability in house prices going down together with a greater supply in the next years. Switzerland was not really affected by the crisis until now, but with the growing unemployment coupled with higher interest rates, there will be consequences on the house market.
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  #30  
Old 24.06.2009, 23:46
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Re: buying Vs renting

I am thinking of buying a flat but not sure if the bank will lend me money or laugh at me considering the rich locals that must approach banks regularly. I don't want to embaress myself in front of the bank manager so can I run it by you first? If the flat I want to buy is 600k and I have 300k saved in the bank with no debts and a current monthly income of 6k. 20% deposit required by bank would be 120k. After paying that I would still be left with 180k in the bank. The unpredictable times we live in could have an effect on my job status one day.

Would I be eligible for mortgage or am I in high risk category and the bank will tell me to get lost? Also how is your chance if you are married, with kids and without kids? Do banks take dependents into account? Is a single person more preferable than a mid sized family with just one bread winner?

On a side note can I even get a 3-4 room flat for 600k in and around Zurich?
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  #31  
Old 25.06.2009, 00:24
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Re: buying Vs renting

I would say there are two factors that are generally taken into consideration when deciding whether to buy or rent, financial and lifestyle. Owning your own property allows you to enjoy a certain freedom that renters cannot. Just reading the terms and conditions pages of a standard lease agreement is motivation enough for some to buy a property.
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  #32  
Old 25.06.2009, 00:36
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Re: buying Vs renting

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Owning your own property allows you to enjoy a certain freedom that renters cannot
Renting a property also provides certain freedoms, like the ability to quickly pack up your stuff and move to Switzerland!
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  #33  
Old 25.06.2009, 08:14
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Re: buying Vs renting

Just by being able to save 300k cash puts you in a very favourable position for a mortgage. Many locals can't save up that amount of money and would probably rather spend smaller amounts on clothes, car and new gadgets. Most locals see property ownership as a thing that they could never achieve without help from mum and dad, purely because of not being able to save the 20% and also wanting something perfect with new furniture and car to go along with it. I have learned that the best house is the one you can afford, so I started small and my current place is certainly not my dream home.

As far as I know dependents are not taken into account, but having two incomes may give you an advantage in how much you can borrow. Look at the UBS affordability calculator online and see if it asks for dependents and whether nor not your afffortability changes with or without dependents.
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  #34  
Old 25.06.2009, 08:45
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Re: buying Vs renting

Making an appointment with a bank to talk address your questions seems like a good idea to me.

Over the past few weeks I got in contact with the Zürcher Kantonal Bank and Credit Suisse to shop around for a mortgage (my own bank is UBS at the moment). I just called the branche office closest to where I live.They were very friendly and interested to meet face to face. Basically the banks take a look at your income (bring a copy of 2008 full year salary statement), your assets (bring a print-out of your asset overview), your context (line of work etc). They might already ask if you have a concrete object in mind. It's important to establish a relation first.
Having just a talk is of course non-binding and I would recommend doing that so they can address your questions. It took me a few coversations to get a good understanding of who things work in Switzerland wrt financing of real estate resp. mortgages.

If you plan on looking for an appartment in canton Zürich, take a look at the nice overview from the Zürcher Kantonal Bankwith ratings for each of the districts and communes in Zürich (resp. Affoltern am Albis, Bülach, Horgen, Meilen, Uster, Winterthur and Stadt Zürich). Also ask around Swiss locals (friends, colleagues) and here on the EF what they find are typically attractive places to live.

Credit Suisse have a very good website, in English describing all about real estate financing, from the Capital Needed to the concrete Financing Procedure. Good luck and pm me if you have questions I can help you with!
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  #35  
Old 25.06.2009, 08:48
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Re: buying Vs renting

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Would I be eligible for mortgage or am I in high risk category and the bank will tell me to get lost? Also how is your chance if you are married, with kids and without kids? Do banks take dependents into account? Is a single person more preferable than a mid sized family with just one bread winner?

On a side note can I even get a 3-4 room flat for 600k in and around Zurich?
Actually I think banks would look at your 300k in the bank account with greedy eyes! So much cash sitting around, waiting to be invested!

The problem for you is your monthly income. Using a worst case scenario of 5% interest rates, you are likely to spend half of it on the mortgage, whereas the general rule of thumb taken by most banks is for 1/3 of your monthly income. I do think that they need to be a bit more flexible here, especially if you probably spend quite a bit on rent anyway right now. I think you have to be willing to put in more than the 20% downpayment.

Use this:
http://www.ubs.com/1/e/ubs_ch/privat...alculator.html

In any case, I don't think you will find what you want for Fr.600k. Even Fr.1m would not be that easy.
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  #36  
Old 25.06.2009, 09:07
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Re: buying Vs renting

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Making an appointment with a bank to talk address your questions seems like a good idea to me.
Yes, it is the best thing to do. Early last year, I had to reset my fixed interest mortgage and UBS was not being very helpful about the costs I had to pay for all my other accounts (savings, current, trading). So I started shopping around. ZKB was great, but Raiffeisen was the best in terms of the whole package. Seeing the appreciation of our house value, they even offered to give us extra cash in case we wanted to refurbish, buy a car, etc. . We politely declined the offer for extra cash, knowing that this would be the beginning of our own credit crisis. We took everything else, including their invitation to Adelbolden to see the World Cup ski races.

So we moved to Raiffeisen. In the past few months, we have seen some houses for sale which would not have been on the market if not for the credit crunch so we are thinking upgrade! Back to Raiffeisen, but they now suddenly have cold feet and are not really accomodating anymore. UBS on the other hand, is very eager to win our custom. They even offered us 95% financing if we pledge my wife's pension (and leaving mine un touched). But again I am thinking... credit crunch... so no thanks...

Point is, shop around. Raiffeisen may not be so eager anymore because in the past year they have had more customers than they can imagine, and the likes of UBS are deperately trying to win back some of their market share...
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  #37  
Old 25.06.2009, 10:13
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Re: buying Vs renting

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Use this:
http://www.ubs.com/1/e/ubs_ch/privat...alculator.html

In any case, I don't think you will find what you want for Fr.600k. Even Fr.1m would not be that easy.
Oh! that calculator is nice. My Swiss friends recently bought a 4 room flat for 600k in a village close to Zurich, newly built. Yes most 3-4 room flats are more than 600k but if I move slightly outside Zurich then that would be possible?

This one in would be perfect for me. Middle of nowhere maybe?


EDIT- Playing with that calculator is quiet depressing. I better save more or earn more.

Last edited by andrewF; 25.06.2009 at 10:49.
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  #38  
Old 25.06.2009, 10:34
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Re: buying Vs renting

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You're missing out the fact that the value of the house can increase over this time. Although, on average, in Switzerland, house price inflation is very low, in the right areas it makes buying perhaps a better bet the renting.
Exactly - a friend of mine bought a house for ~1M three years ago and now got several (unsolicited) offers for up to 1.5M, so he has increased his equity by 500K. His current monthly interest payment is only around CHF 800.

I, on the other hand, have been paying monthly rent in excess of 3,000 for the same three years and don't even own the place I live in. Sure, we can call the landlord everytime something is broken, but that doesn't happen too often in a new building and its a hassle still.

I know these are extreme cases and might involve a lot of luck on my friend's side - still, I feel there can be significant value in buying instead of renting over the longer term. I've started looking into purchasing an apartment or house now.
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  #39  
Old 25.06.2009, 10:43
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Re: buying Vs renting

good thread All....i've heard recently that a re-sale property (not new) actually requires 5-10% down. I've good income which woudl easily get me a 800k place however savings poor therefore looking more for something with little cash down...
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  #40  
Old 25.06.2009, 10:52
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Re: buying Vs renting

I looked into buying a couple of years ago, in the Zürich neighborhood, and found it a pretty depressing experience. It was more or less at the top of the market, and the amounts people were asking for absolute cr*p were incredible.
A factor that puts off a lot of Swiss is the absurd prices charged by any labourer / handyman / plumber, electrician etc., if anything goes wrong. A mate who bought a new-build flat in Langnau bores me to tears with his complaining about how such and such workman ripped him off.

It really depends on what your priorities are. Me and the missus wanted a short commute into Zürich, and we now live in a smashing rented maisonette in Witikon, 10 minutes from work. We could never afford to buy round here.

Cheers

Jim
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