Current mortgage rates and conditions

We chose not to use our pillars as we had enough cash.
For the next acquisition we might use a small part (ca. 10%) of it as our bond share is inline with the arbitrary rule of having age = share of bonds. So bonds représente 40% of our NW. The reason would be not to miss the leverage effect in case we would need it.

Good point, I wasn’t aware that the accumulated 2nd pillar (not the manually injected part) is excluded from these 3 years rule and therefore available for the start capital of a mortgage. Still I am interested in how people accumulate their start capital and how they “save” it until they finally have enough for the 20%.

I just had it sitting in my savings account. Today I would invest it as part of my stock allocation.

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For me (theoretical since I don’t yet have enough aside to consider buying a home):

2nd pillar: I’m not interested in the current yields and can buy it back later on (when I’m nearing retirement). I’d rather have it in real estate, so I’d withdraw it and use it to purchase a home, then buy it back later on when my asset allocation calls for bonds.

3rd pillar:

  • if I can’t get more out of it than I can get in a taxable account, put the max contributions in a bank 3A solution and withdraw it to buy a house (that way, I get at least some modicum of returns out of my cash).

  • If I can get more returns out of my 3A investments than I would in a taxable account (past the first tax reduction that I’d get even if I don’t keep my money in the 3A): invest my 3A, don’t touch it for a house purchase (there are few chances that I can pledge it and still keep it more efficient than a taxable investment but I’d do it if I can figure out a way).

  • Surplus savings: invest it according to my asset allocation, which includes a cash, a bonds and a real estate portion (starting low and growing larger as I get older). Whenever I have enough money on the side and see a good opportunity (or feel that the lifestyle expense is worth it, even when counted as an expense and not an investment), secure the stocks part of my investments and use whatever part of my taxable assets I need to buy the house. Postpone the purchase if it doesn’t make sense selling stocks at that time.

Sorry but this is not correct, the rules are the following :

  • You need to provide at least 10% of core funds that are not coming from the 2nd pillar
  • There is no rule on 3rd pillar funds, that is, those can be used towards providing the 10% core funds
  • There is no cap on how much additional funds you can provide from the second pillar, that is if you want to do a down payment of 30% you can go with 10% from your savings / 3rd pillar (mandatory) and provide the additional 20% from the 2nd pillar

It also has be kept in mind that 20% of equity is the minimum but depending on your salary and the so called lending value of the property you may be required to provide more as you need also to satisfy the affordability rule assuming an interest of 5% on your debt.

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This is incorrect. If you do a payment into your second pillar to benefit from tax deductions you need to wait for 3 years before being able to withdraw from the second pillar without having to pay back the tax deductions you benefited from. That does not depend on how much you put a monthly basis.

One is still able to withdraw at any time even if you do a payment in the 2nd pillar but you just need to be aware that you will lose the tax benefits if you do it earlier that the 3 years mentioned above.

On that topic it is also important to note that if you withdraw money from the second pillar without having used the possible payment buffer you will first be required to repay the amount you withdrew before being able to claim any tax benefit for further payments.

You can find an explanation here : https://finpension.ch/en/voluntary-purchase-calculation/ in the Prevention of tax avoidance section. The part related to the tax repayment is described in the What happens if the blocking period is violated? section.

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Had not enough money in it as I bought a house 4 years after first real job.

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Many thanks for that info - I always thought that what you pay now, can only be used after 3-years period.

Well I was in a different canton by that time and my Pillar 2 provider gave me a number I can withdraw regardless of voluntary buy-ins that happened the year before. I’m not 100% sure at what tax rate the Pillar 2a withdrawal was charged in the end but thought so far that it was significantly less than the regular rate.

You can withdraw it is not the problem, the risk is only losing what you spared in taxes when you claimed the voluntary payment. If you were able to do that operation without the tax authority asking you to pay back the difference that’s a nice deal !

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

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…

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…

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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/

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?

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

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.

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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.

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 :slight_smile:

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.

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…

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%)

@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:

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