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  #161  
Old 05.01.2009, 15:44
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Re: [Ins and Outs] Buying Property in Switzerland

Wait a sec, there seems to be some contradictory information going on here:
You can use your 2nd pillar for the entire 20% or not?
You can pledge the anticipated 3rd pillar for the 20%, or only what is currently in it?
The 3rd pillar can be used as the initial deposit, or the final 20%?

Can I get some clarification please?

It's just all a bit frustrating really, since we could easily afford the mortgage payments on a property of CHF 1m.
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  #162  
Old 05.01.2009, 16:22
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Re: [Ins and Outs] Buying Property in Switzerland

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Wait a sec, there seems to be some contradictory information going on here:
You can use your 2nd pillar for the entire 20% or not?
You can pledge the anticipated 3rd pillar for the 20%, or only what is currently in it?
The 3rd pillar can be used as the initial deposit, or the final 20%?

Can I get some clarification please?

It's just all a bit frustrating really, since we could easily afford the mortgage payments on a property of CHF 1m.
Paddy, you are making it too complicated. Bottom line is this: you may use your 2 Saule (pension) and 3 Saule (voluntary tax-deductable retirement fund) as down-payment for a primary dwelling in Switzerland. Forget about how it is chopped up or broken down. If you happen to have 1 million CHF in either or both of these accounts, you can buy a 1 million CHF house/apartmant straight out cash. If only 500K, then you can make a 50% downpayment, leaving you with a 500K mortgage.

Downside: you will pay extra tax on withdrawing these funds (for 1M CHF something like 70K CHF), and of course these funds are then no longer available for your retirement (you house becomes your retirement fund).
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  #163  
Old 05.01.2009, 16:40
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Re: [Ins and Outs] Buying Property in Switzerland

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Paddy, you are making it too complicated. Bottom line is this: you may use your 2 Saule (pension) and 3 Saule (voluntary tax-deductable retirement fund) as down-payment for a primary dwelling in Switzerland. Forget about how it is chopped up or broken down. If you happen to have 1 million CHF in either or both of these accounts, you can buy a 1 million CHF house/apartmant straight out cash. If only 500K, then you can make a 50% downpayment, leaving you with a 500K mortgage.

Downside: you will pay extra tax on withdrawing these funds (for 1M CHF something like 70K CHF), and of course these funds are then no longer available for your retirement (you house becomes your retirement fund).
Thanks for the simplification Karl. That's what I had in mind, but some of the previous information was contradictory. So, for example, for that 1m house, I can use 100k of 2nd and 100k of the anticipated 3rd as downpayment? So I can even use an as yet non-existent 3rd tier as a downpayment?
I may seem a little naive, but I was never a homeowner in the UK
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  #164  
Old 05.01.2009, 16:58
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Re: [Ins and Outs] Buying Property in Switzerland

I was once very interested in using the anticipated 3rd pillar income as a deposit for a house but after much searching I have not yet found a bank which will accept this.

Chester.
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  #165  
Old 05.01.2009, 17:26
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Re: [Ins and Outs] Buying Property in Switzerland

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Thanks for the simplification Karl. That's what I had in mind, but some of the previous information was contradictory. So, for example, for that 1m house, I can use 100k of 2nd and 100k of the anticipated 3rd as downpayment? So I can even use an as yet non-existent 3rd tier as a downpayment?
I may seem a little naive, but I was never a homeowner in the UK
From the 2nd Pillar you can only use that amount that you have made in extra repayments. We came to Switzerland at 25/27 and we "topped-up" our pension fund back to as if we were working from age 18 with a tax advantage. We needed to withdraw these funds from the pension and pay a small amount of tax on them. Ask your pension fund exactly how much you can withdraw.

From the 3rd Pillar you can pledge the entire amount to the bank. Pillar 3 accounts are restricted to a CHF 5,365 (this year) deposit per person per year, and with no existing account, you will have the anticipated 100k between you and your partner only in around 10 years.

Last edited by CH_Me; 05.01.2009 at 17:45.
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  #166  
Old 09.01.2009, 03:22
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Re: [Ins and Outs] Buying Property in Switzerland

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I was once very interested in using the anticipated 3rd pillar income as a deposit for a house but after much searching I have not yet found a bank which will accept this.

Chester.
I think this is where the confusion is coming in. AIUI (and I'll be checking myself tomorrow), for the 20% equity/deposit, you can only pledge or withdraw your 2nd pillar (BVG) so you are limited to the amount you have available in there (as Richard said, not the whole pot but a large percentage). If you take this amount (it's on your annual pension statement), add the amount of any cash you can contribute and multiply it by 5, this will give you the value of house you can buy.

Once you have done that you can then pledge a new or existing 3rd pillar account as indirect repayment of the second mortgage part (the mortgage covering the 65-80% loan-to-value). What this does is reduces the amount you are actually repaying each quarter but then you can, at some point, withdraw from the 3rd pillar and use the money to repay what's left to repay.

What I'm going to be asking about tomorrow - and I'd welcome any answers if anyone knows - is what the advantages and disadvantages are of withdrawing from the 3rd pillar to repay a (largish) chunk of mortgage. Tax on the withdrawal I've seen here, but is there also a penalty in the form of not being able to continue paying in? Or do you have to top it up to the value you withdrew before you can retire? i.e. if you withdraw 100,000 say 20 years before offial retirement age, do you have to put that 100,000 back into the 3rd pillar before you retire? (If so presumably it's easier to do that top up if you're not paying a mortgage as well)
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  #167  
Old 09.01.2009, 09:12
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Re: [Ins and Outs] Buying Property in Switzerland

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What I'm going to be asking about tomorrow - and I'd welcome any answers if anyone knows - is what the advantages and disadvantages are of withdrawing from the 3rd pillar to repay a (largish) chunk of mortgage. Tax on the withdrawal I've seen here, but is there also a penalty in the form of not being able to continue paying in? Or do you have to top it up to the value you withdrew before you can retire? i.e. if you withdraw 100,000 say 20 years before offial retirement age, do you have to put that 100,000 back into the 3rd pillar before you retire? (If so presumably it's easier to do that top up if you're not paying a mortgage as well)
The Pillar 3 is your own funds and you don't need to top it up again if you repay your mortgage from it before you retire.

I personally repay my mortgage every year using a "pledged" Pillar 3 account, but my mortgage principal remains the same. Pillar 3 accounts are not included in your wealth taxes - so it makes sense to keep the mortgage debt and a large Pillar 3 account that the bank has first dibs to or "pledged" to the bank. You can still make withdrawals from a pledged account with the bank agreement as long as you have more than the agreed repayments (according to your mortgage contract) in the account.

My intention is to use cash to repay the 2nd mortgage upon retirement and keep the Pillar 3 for myself.

Hope this helps
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  #168  
Old 09.01.2009, 09:47
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Re: [Ins and Outs] Buying Property in Switzerland

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From the 2nd Pillar you can only use that amount that you have made in extra repayments.
Are you sure about this? I checked our BVG statements and according to mine, I can use the entire amount: "Bis zürn 50. Altersjahr entspricht der Betrag, der für den Erwerb von Wohneigentum zur Verfügung steht, der dem Mitglied zustehenden Austrittsleistung", whereas my wife can use around 90% of hers.

Another question, apart from the downpayment, what other fees would we be expected to pay "up front". Solicitor, of course, but what else?
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  #169  
Old 09.01.2009, 10:34
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Re: [Ins and Outs] Buying Property in Switzerland

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Are you sure about this? I checked our BVG statements and according to mine, I can use the entire amount: "Bis zürn 50. Altersjahr entspricht der Betrag, der für den Erwerb von Wohneigentum zur Verfügung steht, der dem Mitglied zustehenden Austrittsleistung", whereas my wife can use around 90% of hers.

Another question, apart from the downpayment, what other fees would we be expected to pay "up front". Solicitor, of course, but what else?
If it says that next to an amount, then you can use that anount it to buy property up until age 50 Be careful with the rules, because I remember reading that the rules changed in 2006 and any amount you withdraw needed to be repaid before retirement.

Valuation fees, inspection fees and fees for having a solicitor read over your contract are upfront fees. If you don't speak the local lingo, you will need the contract translated and a translator present with you when you sign the contract.

Notary/solicitor costs for the purchase are normally 1% of the price split between buyer and seller according to what is written on the purchase agreement. ours was 50/50. This wasn't paid up front for us, but a bill was sent a couple of weeks after the sale.
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  #170  
Old 09.01.2009, 10:54
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Re: [Ins and Outs] Buying Property in Switzerland

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The Pillar 3 is your own funds and you don't need to top it up again if you repay your mortgage from it before you retire.
So can you conceivably do this more than once? I can conceive of a time sometime in the future when we might want to escape the rat race but keep the house effectively as our pension, so reducing the outgoings that keep us tied into the rat race is potentially more important to us than the odd bit of tax here and there.
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  #171  
Old 09.01.2009, 11:01
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Re: [Ins and Outs] Buying Property in Switzerland

Another cots of buy is the Schuldbrief (letter of guarantee of loan) which you lender will require to be lodged at the local Notoriat. The cost of these is 1% of the loan. Thus is you borrow £500,000 this will be CHF5,000.

If buying an existing property you can inherit any Schulbrief s free of charge...

If buying new watch out for water and cable TV connection costs which can be hefty.

Otherwise legal costs* can actually be quite low...

*which are tax deductible
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  #172  
Old 09.01.2009, 11:14
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Re: [Ins and Outs] Buying Property in Switzerland

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So can you conceivably do this more than once? I can conceive of a time sometime in the future when we might want to escape the rat race but keep the house effectively as our pension, so reducing the outgoings that keep us tied into the rat race is potentially more important to us than the odd bit of tax here and there.
Yes, but you are restricted to deposits of 5,365 (2008) per person per year.
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  #173  
Old 09.01.2009, 11:19
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Re: [Ins and Outs] Buying Property in Switzerland

I was looking at the mortgage calculator on the UBS website and it kept referring to "ancilliary costs" on top of the mortgage repayments. What exactly does this mean and what do they include? As always, the bank website is somewhat vague.
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  #174  
Old 09.01.2009, 11:31
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Re: [Ins and Outs] Buying Property in Switzerland

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I was looking at the mortgage calculator on the UBS website and it kept referring to "ancilliary costs" on top of the mortgage repayments. What exactly does this mean and what do they include? As always, the bank website is somewhat vague.
These "ancilliary costs" are a yearly 1% provision that you keep for future repairs. They are not what you need to pay, but are used in the affordability calulator. This really confused us as well.
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  #175  
Old 09.01.2009, 11:38
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Re: [Ins and Outs] Buying Property in Switzerland

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These "ancilliary costs" are a yearly 1% provision that you keep for future repairs. They are not what you need to pay, but are used in the affordability calulator. This really confused us as well.
So it's really just an estimate, based on the price and type of the property and not a mandatory payment?
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  #176  
Old 09.01.2009, 11:50
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Re: [Ins and Outs] Buying Property in Switzerland

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So it's really just an estimate, based on the price and type of the property and not a mandatory payment?
Yes it is just an estimate, but you could end up paying more in maintenance too.
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  #177  
Old 09.01.2009, 11:50
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Re: [Ins and Outs] Buying Property in Switzerland

It's 6365, not 5365 isn't it? Well, it is according to UBS!

Edit - in fact it looks like it's gone up to 6566 in 2009
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  #178  
Old 09.01.2009, 11:53
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Re: [Ins and Outs] Buying Property in Switzerland

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It's 6365, not 5365 isn't it? Well, it is according to UBS!

Edit - in fact it looks like it's gone up to 6566 in 2009
Yes I believe you are right. So many figures going on in my head at the minute
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  #179  
Old 09.01.2009, 12:53
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Re: [Ins and Outs] Buying Property in Switzerland

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It's 6365, not 5365 isn't it? Well, it is according to UBS!

Edit - in fact it looks like it's gone up to 6566 in 2009

I did not think these were limits. I understand them to be the maximum you can get for tax deductable. You can contribute more if you wish to your 3a but there is no tax benefit.

Is this correct?

bill

Last edited by bill_door; 09.01.2009 at 17:01.
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  #180  
Old 25.01.2009, 17:53
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Re: What to look for when buying a house in Switzerland

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...deleted previous part...

2. Pledge your pension money. The money stays in your account and the bank has some form of security. Theoretically the bank can take it if you default. However they are not able to do this quite as easily as you might think as the money is tied until you retire or leave and they have no access till that date...

3. Pledge your third pillar. This is very tax efficient as you are relieved the tax burden on this money and this can be used to keep the bank happy. However you will need to have a life insurance policy to cover the difference between the 20% and the amount in the pot - but this is quite cheap.
Thanks for putting up this useful information. You answered the question I was going to ask about leaving the money in the pension but using it as security rather than withdrawing it. I really can't understand why someone would withdraw it if they have this option but perhaps I have a limited imagination.

But now, you have created a second question for me to ask. Third Pillar? I'm unfamiliar with this. Do I have one?
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