As far as I can tell, 2nd pillar can be used to pay 10% of the property value if you will live in it yourself (half of the 20% that you have to pay yourself, where the other 80% is mortgage, being the first mortgage and second mortgage)
If you did not use 2nd pillar from the beginning, but after many years of paying amortizations, you paid off parts of the mortgage so that it is now 60% of the property value (so only what is called the ‘first mortage’ remains).
Would you now at this point in time have the option to use this 2nd pillar to pay of parts of the rest of it, or even ALL of it if that were possible? Or is 2nd pillar really only usable for the first 10% of the price, nothing more than that?
And related question: if you would lose your income and no longer have tragbarkeit (no longer fulfill the affordability calculation due to e.g. job loss), can you pledge the 2nd pillar as an alternative here? Or again is the pledging only possible for this first 10% of the value?
If not that, can you at least still use it for 10% of any part of the mortgage?
Example to make it clear:
Say there’s a 1M property. You paid 200K when buying it, and took 800K mortgage. After several years of amortization payments, you paid of a further 200K so the mortgage is now 600K.
You have 200K in your pillar 2 and live in this property yourself.
Can you now decide: I want to use this 200K from pillar 2 to further pay off this mortgage down to 400K. Or alternatively, if bank recalculates and finds you don’t have tragbarkeit anymore for the 600K, can you pledge this 200K to have more affordibility again? If you’d have a 600K 2nd pillar, could you even pay off the entire mortgage in one go?
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The usual limitations are:
When you buy:
- you have to pay 10% down with hard funds (can’t be 2nd pillar);
- you have to pay another 10% down in the same or another manner (can be 2nd pillar, can be hard funds);
In general:
- you can’t withdraw less than 20k from your 2nd pillar;
- you can, but don’t have to, take a mortgage for up to 80% of the value of your acquisition. 15% must be amortized within 15 years;
- past 50 years of age, you can only withdraw the amount you had at 50 or half the current amount of your 2nd pillar;
- you can only withdraw from your 2nd pillar every 5 years;
- if you’ve withdrawn from it, you can’t do buy-ins into that 2nd pillar until you’ve repaid what you’ve withdrawn (you get the taxes you’ve paid back when doing so but no tax deduction).
Some, but not all, of these conditions can be negociated with the bank as they have some discretion as to how they assess your affordability.
So:
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you can pay more than 10% of the value of your acquisition with 2nd pillar assets (but no more than 90% as 10% still need to be hard assets).
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you can withdraw from the 2nd pillar to pay down the mortgage. You can do so whether you used part of your 2nd pillar at the time of buying or not (but if you did, you then have to wait 5 years to make an additional withdrawal).
In your example, the answers to the 3 questions are yes (paying down part of the mortgage, pledging the 2nd pillar and paying the mortgage off completely).
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A note that this only applies to the 2nd pillar withdrawal part of the equation. Limitations to mortgage amortization can exist on the mortgage side of it (fixed interest mortgage that can’t be over-amortized before its term and such things).
What do you mean by this exactly: if you indeed have a fixed term mortgage, and now the bank re-evaluates your affordability and you no longer pass: can you then still do the 2nd pillar withdrawel to pledge or pay part of it and get on good terms for affordability again?
I don’t have experience in your specific situation nor in the inner workings of banks, so the below could not be fully accurate and is derived from educated “common sense” thinking:
In the scenario you present, I guess the bank will be ok (and actually happy) with that and it will occur.
I was trying to differenciate 2 things:
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when amortization is possible/required (or that pledging the 2nd pillar would solve the situation at the bank’s satisfaction), the rules I’ve written in my first message apply. That would be the case in your situation where the bank would probably be the one initiating the process to get you within their affordability parameters again.
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Not all mortgage contracts allow amortization freely. Depending on the situation and the contract, the bank may or may not allow additional amortization. If it doesn’t, then the whole problem is moot: they’re happy with your affordability as is and you don’t need to do anything to improve it.
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A few things that people here haven’t seemed to grasp:
If you get your 2nd pillar it’s either because you’ve reached 65 or you’re moving out of the country permanently. Ie switching our tax residence.
Boy, do they like that…
In short: IF your mortgage is 100% fixed (which you should do), YOU MIGHT propose a special amortisation. IF they agree.
IF you have a portion of your mortgage in SARON rate, you can repay/amortise that any 3 month. No questions asked.
Tax-wise, it’s not a really good idea. Intellectually, it depends on you.
FINANCIALLY you are better off investing your 2nd pilier in something/anything that pays over 5-6% monthly. It’ll pay for your mortgage.