Current mortgage rates and conditions

[Broth]

It could be that otherwise I would not accepted. as working for an insurance company with quite good conditions…

But may will be good to have another check after I discover Viac, Franky…

[Broth]

Depends, I was in a lucky position (my wife and I work and no kids) when I start saving.

I had more than 20% sitting in my bank account (need a lot of massage to my wife to lose the fear to the stock market)
Even do I have pledge my pillar 2 (already remove the pledge). But I have not cashed out them.

But I believe that it depends the opportunity that it’s in front of you. I have a colleague that bought a house 7 years ago for 1.1m and after some renovations, the price of his house was 2,2. So not bad…

[SwissDan]

@MrCheese

Iirc I just paid the regular lower rate for the withdrawal and argumented that I didn’t touch the voluntary part.

That is clearly not allowed anymore (from 2010):

Which pension assets are affected by the blocking period

In its ruling of March 12, 2010, the Federal Supreme Court defined which pension assets are affected by the blocking period. This clarification was necessary because reading the wording of the law (Art. 79b para. 3 BVG) one might think that only the purchase sum would be affected by the blocking period. However, this is not the case: The entire 2nd pillar pension capital is blocked for three years, regardless of the pension fund with which it is held.

Source: https://finpension.ch/en/voluntary-purchase-calculation/

[MrCheese]

interesting… I personally think it’s a silly rule as I didn’t know that I would buy a house in 2017 after some Pillar 2 buy-in in 2016.

But I guess we all agree by now that Mr. Market would provide higher returns so Pillar 2 buy-ins might not be worthwhile in the first place?

[nabalzbhf]

@MrCheese

But I guess we all agree by now that Mr. Market would provide higher returns so Pillar 2 buy-ins might not be worthwhile in the first place?

Compared to 100% stock yes, but some people like to have lower volatility.

@SwissDan

That is clearly not allowed anymore (from 2010):

Hmm weird, I think if I look at the dashboard of my fund provider it does list X - buyin as available for primary residence withdrawal.

[SwissDan]

@nabalzbhf

Hmm weird, I think if I look at the dashboard of my fund provider it does list X - buyin as available for primary residence withdrawal.

Well, technically you are allowed to withdraw it, but you will have to pay the consequence (retroactive taxes). Normally pension funds know this and will warn you about the tax issues.

[wesker]

Hi there,

Wanted to have some of your always interesting advice on my situation as I am in the process of choosing the way I will pay the appartement I am buying.
Our situation :

• Revenue : 130k CHF + 117k CHF
• Accounts : 220k CHF (cash) + 130k CHF (cash) + 70k CHF (shares)
• Others : 40k CHF (3rd pillar) + 34k CHF (3rd pillar)

The appartement is 900k CHF and my girlfriend and I want to put the 20% equity without touching our 2nd and 3rd pillar -> 180k CHF

We have different option with insurances or banks with approximatively the same interest rates :

SARON : 0.8%
5 years : 0.8%
7 years : 0.9%
10 years : 0.95%
15 years : 1.25%

We also want to include an option to be able to sell the apartment without paying fees if the mortgage is not over at this moment (approx. +0.05% to the rates mentioned).

From there many questions :

Do you recommend to split the mortgage (decrease risk of interest rate when renewing but increase dependency to the bank/insurance) or having a single mortgage (opposite) ?

What king of amortization do you recommend ? As we have enough revenue to reimburse the mortgage and fill our 3rd pillar. I precise that my girlfriend is risk adverse and won’t invest and that due to my position at work I can’t invest more that what I have already.

Thanks in advance for your tips

[MrCheese]

@wesker

Do you recommend to split the mortgage (decrease risk of interest rate when renewing but increase dependency to the bank/insurance) or having a single mortgage (opposite) ?

Since you will lend 80% you will have no choice but get two mortgages. One for 66% and one for the rest. Just make sure to set the same expiry time for both, banks usually try to trick you into different durations so you can’t easily switch providers.

@wesker

What king of amortization do you recommend ? As we have enough revenue to reimburse the mortgage and fill our 3rd pillar. I precise that my girlfriend is risk adverse and won’t invest and that due to my position at work I can’t invest more that what I have already.

I went with the Pillar 3a indirect amortization but wouldn’t do that again because the banks Pillar 3a has close to zero interest rates. That way I’m missing out on a product like VIAC for the 3rd Pillar…

@wesker

5 years : 0.8%
7 years : 0.9%
10 years : 0.95%
15 years : 1.25%

0.8% for 5 years sounds rather high, I had in mind that 0.5% was still gettable for 5 years. Try to talk with banks face to face instead of using 3rd party mortgage brokers. I had good experiences playing a Raiffeisen against the cantonal bank which funded the construction, that drove down the 5 year rate by 0.3% (0.94% instead of 1.25%)

[Cortana]

@MrCheese
You can get one mortgage for the whole amount. The 66/80% thing is just regarding amortization requirements.

Plus, check out my other post regarding 3a amortization:

@Cortana

Let’s assume you buy something for 900k with 180k equity and 720k mortgage. Banks want you to reduce your mortgage down to 2/3 within 15 years or at least build up enough pledged assets to get there (indirect amortization). So from 720k to 600k within 15 years means you have to amortize 8k/year. There are basically two reasons why banks want this. First they reduce their own risk if the house needs to be sold. And 2nd your income will be reduced significantly once you are retired and thus your debt sustainability will be lower. That’s why with indirect amortization with 3a pledging you don’t have an obligation to amortize the mortgage after 15 years. They’ll let you wait till you want to retire and check the situation then. Maybe once you retire the house isn’t worth 900k anymore, but 1200k. So your mortgage (still 720k) just makes up 60% of it and thus making further amortization obsolete, your 3a will be freed if your retirement income is high enough to substain the 720k mortgage.

Now you have 2 options for amortization:

1. Directly. Mortgage will be reduced by 2k/quartal for 15 years.
2. Indirectly. You have to use their own 3a and pay a combined 8k/year into it. You are still able to invest it, but you need to use their funds.

You might think now “No way I’m going for their shitty actively managed 3a solution, I’m going to amortize directly”, but from a financial side this is the worse decision. You basically end up investing 8k per year into your property to reduce your interest costs by less then 1%. A wiser decision would be to pay 8k/year (4k each) into their 3a and the rest (2.8k each) into Viac. Then invest anything else what you save in IBKR.

[JLaw]

I do not get why you would not touch 3rd pillar. This is an easy way to realise the tax advantage and further allows you to split in more than 5 withdrawals over your lifetime, which will reduce your total tax burden on the withdrawals (the only minor downside: the former 3a money would no longer be excluded from wealthtax).

[HoiZame]

One may also use the 3A to repay a mortgage at any time so you are not bound to using it only at inception. Also pledging your accounts (which counts as core funds) allows you to increase the size of the mortgage while keeping your money invested and benifiting from the interest tax deductions all together.

[wesker]

Thank you very much for all of your answers.

Is it correct that with a indirect amortization, the bank checks after 15 years how much is the apartment worth and take in your 3rd pillar the necessary amount to have the remaining 67% ?

[Broth]

I believe that if you have it in other source you can decide whether is the pillar 3 or other source.
But yes, there is a rule to have paid X amount before retirement.(there is a comment from Cortana above)

[Dago]

@babyjag

These types of services (like Moneypark) are for people who do not have the time to make a proper “request for proposals”.

Does any one have experience demonstrating whether the rates obtained by Moneypark (or any advisor) is better or worse than the ones you get when negotiating alone ?
I would consider paying 500 chf for saving my time and getting a few offers but not if I get worse offers.

[Cortana]

They say they work with 100 different banks, pension funds and insurances, but count each Raffeisen branch individually lol. So in reality they don’t check that many institutions. Plus the MP employer won’t contact all the banks and focus on those he has good relationships with.

I know this because one of my best friends works at Moneypark.

[Dago]

Thank you, very valuable insight.

[Barto]

@HoiZame

There is no rule on 3rd pillar funds, that is, those can be used towards providing the 10% core funds

Thanks for this post. Does anyone know if banks accept pledge of 3rd pillar for the 10% as opposed to withdrawl and cash payment? I asked UBS a while back and the advisor said that with them it had to be withdrawl and cash payment. I am not convinced the advisor truly knew for sure

[HoiZame]

I did a simulation with UBS recently and it included a max mortgage simulation for which I only had to provide 16% cash instead of 20% the missing 4% being pledged from the 3rd pillar so yes it is possible but it all depends on your capacity to pay the interests of the mortgage at 5%. If you pledge with UBS though you have to have the 3rd pillar with them, they do not accept external 3rd pillars as pledge.

[rolandinho]

I asked a similar question here recently, maybe it helps.

VIAC: which non-individual "strategy" have you chosen?

Hi @yetanothername, is your 3a at Viac pledged to a mortgage? What is the value of the pledge to the mortgage bank, in relation to its current value? How does it work when during a “crash” the value of your 3a goes down? Does the mortgage bank somehow check the value of their “security”, like once a year or something?

[Sirob]

This is possible and I am using the same approach (pledged existing Pillar 3A accounts) for my mortgage with UBS.