Correct. Both work, given the affordability. Some might even give 90% without pledging, but regulations don’t encourage it.
With pledging, you keep it insured, don’t pay the withdrawal tax and continue to get interests. You’ll pay more mortgage interest, as well.
I haven’t touched pillar 2, but I assume you’d still be expected to amortize down to 65% over the years, so your amortization would be higher, as well (which again factors in the affordability calculation).
Ok but what happens if the 15y (when you have to bring the 15% to get your 35%) are over and a crash is happening at the same time ? You got to sell your stocks at a low price and then inject some more cash (→ which basically means you have to keep build cash on the side with the same opportunity cost) or what is happening exactly ?
That is also news to me. I thought the minimum downpayment had to be cash. But apparently you can also pledge the 2nd pillar (quick google research). Also here the question, what is exactly happening at the end when you are supposed to reacht the 35% amortization ? You got to bring the cash or not ? Do you transfer from 2nd pillar ? you get the choice ?
I guess the interest will be paid over the full 90% then ? in case of the 2nd pillar it would make less sense, since the return and the interest paid are similar (and the paid one could be even higher than the return on the extra-mandatory)
Thanks for the clarification.
I’m not sure, I’m years away from that. But interesting question whether the bank will actually ask you to amortize the 3a amount directly, or let it run indefinitely. Maybe some longer-time owner can chip in?
Good chance they’ll re-value the property and you already reach that level without amortizing.
My assumption is you’d have to amortize these 10% over the years, not lump-sum in the future.
Of course. Whether it makes sense depends on the situation. The typical use case would be either you want max mortgage, and /or you have high income but low equity (i.e. you don’t have 20% in cash).
Pledging is a transaction which hasn’t anything to do with the location of the assets (neither on Pension fund nor on 3rd pillar side)
You just have to enter the pledge with both institutions.
If your pillars are “overflowing” and the mortgage provider plays along you might be able to get a property without any cash down.
Source: own experience
Correct. You amortise as you wish and usually on a monthly basis from the first month so that in 15y you have reached the 35% value.
So first 15y you pay interest and amortisation. From 15y forwards you can choose to pay only interest and stop amortisation. This is when it gets interesting. Because rent prices in 15y from now are going to be nothing close to the interest amount (in my case if I pull the trigger now it’s going to be 1000 per month)
You may achieve it by amortizing 0 if your real estate gains value.
Your debt must not represent more than 65% of the asset value, imagine you have 100% mortgage on a 650K object. If in 15 years your apartment is valued at 1M, even if you had not amortized and you still have 650K debt, you’re within the limits.
For what it’s worth. This is equivalent to 2.91% price growth per year - which is below historical growth rates for ~3.3-3.6% p.a.
Perfectly doable
Edit: Come to think of this. Asset price growth in line with historic dimensions combined with banking industry regulations lead to your LTV being down to less than half after 15 years.
Interesting detail that I did not know.
So assuming an asset value increase per year, amortisation “pressure” reduces
This is encouraging thanks
Revisiting this
I read that “in Switzerland, the amortization rule is fixed on the loan amount, not on dynamic LTV — you still must contractually bring your mortgage from 75% → 65% of purchase price within 15 years, regardless of appreciation.”
So this does not apply then? Gemini suggests that’s wrong and dynamic LTV can reduce amortisation obligation.
Does anyone know for sure if banks reassess periodically the property value as value can appreciate?
It probably means that once the mortgage contact is signed and the amortization terms are fixed in it, you can’t change them, which is correct.
You mortgage contract will run out at some point, and then it will be the time to reevaluate the value of the property and get a new contract. The amortization conditions will be based on the new situation, and often you will be already above the threshold required.
What is a usual duration of these contracts?
It depends. For a fixed mortgage, it’d be the term. You’d probably find some statistics online, I bet 10 years is the most common, followed by SARON.
For SARON, my contract is indefinitely, yet with a few month notice period. The contract includes what I amortize (partly indirectly with 3a, partly directly), just as PI wrote. Most likely, this could be adapted, but I don’t care.
The bank did mention they could eventually re-evaluate, I think there’s some regulatory period for that. It sounded a bit like an invitation to eventually borrow more.