Amortization, property abroad

Real Estate
1

Hi folks !

We are in the process of acquiring an investment property abroad and can be financed by our Swiss bank.

We have to decide how to amortize the 2nd installment of the mortgage (not very high, 4000 CHF annually)

The only option I see would be a 3rd pillar 3b with protection in the event of disability or death.

Would I be wrong?

Based on your experiences, would there be a better option for cushioning, while having minimum protection?

Please note that I cannot go through the 3rd pillar 3a from Viac.

Thank you for your feedback!

2

I may not be understanding your conundrum correctly.

I would check that my dependents are properly covered in case of death and/or disability and that I am myself adequately covered too in case people contributing to the income of my household were to be stricken by death and/or disability. If that’s not the case, I’d contract a risk only insurance covering that, outside of 3a unless I can’t max my 3a anyway.

For amortization, I’d do it with cash issued from my regular cashflows and invest the rest at my target allocation, at my prefered broker, without constraints.

As a property owner, I would want to have access to some amount of cash on hand to cover unexpected repairs without worries.

3

Curiousity, which bank is financing abroad? I struggled to find one

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4

I get the feeling you might be confusing two things: Risk insurance and indirect amortization.

Risk insurance

Having term life insurance throughout the mortgage term is often required by mortgage lenders. But it is not strictly necessary if your surviving dependent has the money to amortize or service the mortgage in the event of your death.

The cheapest option is diminishing term life insurance (the sum insured goes down in keeping with the amortization of your mortgage). In any case, you should only ever use term life insurance (pure insurance that pays an pre-agreed benefit if you die within the term). Do not get any kind of cash-value life insurance (savings insurance, mixed life insurance, etc.).

If the person you want to protect financially is not your spouse or child, then you will generally have to use the pillar 3b, because if you get it in the pillar 3a, you can primarily name your family as beneficiaries. If it is your spouse or child, then you can get either pillar 3a or pillar 3b term life insurance.

Disability insurance is only necessary if your income would decrease if you became disabled (accounting for the disability insurance you may already have through Swiss employer-based pension funds, accident insurance, and social disability insurance (DI).

Indirect amortization

Your mention that you cannot go through the 3rd pillar 3a from Viac indicates that you want to indirectly amortize the mortgage using the pillar 3a. That is something completely different to insurance. Indirect amortization is only possible for a primary residence (not an investment property).

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