I’ve been reading the forum for quite some time and I must say this is so interesting to read all your discussions. Now, I just open this website instinctively as soon as I have some free time, just like I would open a news app or a game not to get bored. Thanks a lot for all the knowledge shared, very useful.
Here is the context: I’m about to buy a proprety for the price of 760’000.-. This is a new construction, starting in Q2 2023 and delivered in Q1 2025. The sales will be done through a Forward Sales.
My equity is split as followed:
Cash: 100’000
3A: 40’000
2A: 60’000
I went to see my Bank and they said the financing is fine for them. I’m in contact with other banks to see what they have to offer in comparison.
As this will be a forward sales, I will have to pay 20% (152k) at the contract signature (+ the 4-5% (38k) of notary fees) and 80% (608k) when receiving the keys.
In order to pay for both the 20% deposit + 5% notary fees (190k), I will not have the necessary cash for it, threfore I would need to withdraw my 3A+2A.
My bank is saying that they could grant me a first instalment of 100k (they cannot give lower than 100k per instalment) to help pay for the deposit+notary fees, which would allow me not to withdraw my 2A.
My question is, is it better (and possible) to pay the first 20%+notary with my own cash/3A/2A (can I withdraw my 2A like that?), so I avoid having to pay interest on a first instalment during 1.5years and then ask for the mortage only at the end of the construction? Or would it be more interesting to take the instalment for tax purposes or any other reasons?
The answer I think is obvious if you compare how much you earn with your second pillar and how much you pay for the mortgage. Calculate in tax deductions if you pay for the mortgage.
Check details of your pension fund and in particular what is the minimum interest they pay and what they have paid for the years that were very good for stocks (2019, 2021). You can consider this income tax free, in principle there is a tax for withdrawing these money later, but it is difficult to factor in and you want to withdraw your 2nd pillar in few years anyway, so should not be a big thing.
Even without knowing details of your situation, my guess is that you will pay more for the mortgage than you earn with the second pillar, because the bank also wants to earn money.
PS. Don’t forget to consider insurances coming with the second pillar, how important are they for you and how your coverage is going to change if you withdraw some money.
The first question should be: Will my pension fund allow a withdrawal in the early stages of construction? Or even before that when signing the contract.
In my experience most pension funds are rather restrictive.
Thanks Dr.PI for your feedback. Actually, as I will have to only pay the remaining 80% in 1.5years, I will be able to keep saving during this time and therefore increase my equity and I should have no need to use my 2A.
Good point, this is something I have to look at more into details. I must say I’m not fully aware of all the conditions and impact related to a withdrawal
You are right, I should check if they allow that to see if this is a possibility, otherwise the solution is quite clear, I will have to use the first instalment.
Depending on your goals and the target assets allocation, you might actually want to use this once in a lifetime opportunity to cash out your second pillar in advance of the regular term.
I called my Pension Fund, and you were actually right @Cortana , they didn’t allow any withdrawal as they said the duration of this Forward Sales is too long, nothing was yet started/built and as the transfer of property is done only at the end of the process, the risk is too high for the Pension Fund. If I requested the funds near the end of the process, this would be fine for them, but not at this early stage.
Now I’m checking with the counterparty to be able to pay 15-18% instead of 20% at the contract signature and delay for a few months the 2-5% missing, hoping they would agree with this solution.
Yes indeed they need the funds as the promoter is most likely getting a loan from a bank to finance the project and they need some equity as collateral for the bank.
So with bonus payment coming this month, I will be able to gather the 20% without any outside help, which is a good news. But now I’m wondering…
I didn’t pay anything to my 3A yet this year. Is there any point on doing a full 2023 yearly deposit on my 3A this month and then withdraw everything in a month or so in order to use it for the 20% deposit? Would it make sense on a tax point of view or as I will anyway withdraw it it will neutralize the tax advantages?
I checked with my Pension Fund and at this stage I can’t, they don’t allow withdrawal to deposit the 20% on Forward Sales. Only at the end of the process I could use it if necessary.
Small update on the purchasing of my apartment. We have more than enough to put the 20%, but this is a mix of cash and 3A.
I have been asked by the notary to come sign the Forward Sales contract, and I was mentioning that I would need them to sign a form so my 3A could release the funds, and out of the blue they said: “Oh, but for this type of sales, you cannot use your 3A.”
I replied by saying that I said to the promoter, to VIAC (who said it was okay to withdraw the fund) and also mentioned to the notary that I will use 3A funds and no one clearly said anything about it which made me think that I could use them without a problem. I was really pissed that the promoter nor the notary could mention this important condition earlier in the process…
The notary said that I can in deed withdraw my 3A funds but he will not be able to release the funds to the seller, they will have to keep due to the fact that the transfer of proprety is done at the end of the process and in case of “death” that could be a problem, etc… basically same issue than if I was using my 2nd pillar.
What I don’t understand is why VIAC would release the funds but then they would be locked by the notary until the end of the construction and transfer of property. I thought this funds that I saved volontarly could be used freely to buy a home/do some renovation and that would be basically my risk if I buy a property and end up losing everything. I understand the blockage from my 2nd pillar, but I don’t understand why it’s VIAC/notary problem when I’m using money I saved myself and decided freely to put it to the 3A as long as it’s clearly for buying a flat which is confirmed by the notary contract.
That’s a shame because if I knew that I couldn’t use my 3A funds, I wouldn’t have deposit the 7k on VIAC 2months ago…
Did anyone know that particularity for the 3A withdrawal and usage?
Well I had to fill out a VIAC form that the beneficiary of the funds has to sign. I sent it to the seller/promoter who said “we don’t accept WIR payments”. At first I thought that they misunderstood and thought I would transfer some kind of currency named WIR, so I confirmed it was 3A funds in CHF from VIAC which uses WIR bank as depository. They confirmed that they don’t want to work with WIR because they had a lot of issues with them on prior projects to get the funds released, and said I should check with the notary if I could find an arrangement.
When I contacted the notary, they said that all 3A funds cannot be used as 20% down payment and it should be only cash. I replied by saying that even though VIAC didn’t officially confirmed I could withdraw the money, they basically said it was fine and I just need the form I was mentioning at the beginning to be signed by the beneficiary in order to end the process.
Notary said that in deed VIAC will certainly release the funds, but them as notary cannot release the funds to the seller and will have to keep it on a blocked account by the notary until the transfer of property can be done (in this case at the end of the construction), and this is something that is mandatory to them. I asked what was the reason and they said “if you die, as the transfer of property is done at the end there might be a risk blablabla…”.
I asked if I could sign any document or whatsoever who could remove the responsibility on them but she said that nothing was possible.
I must say I’m a bit lost, it’s very unclear and I feel very pissed that this kind of very important condition is not mentioned by anyone anywhere at the beginning of the process.
Now I’m basically missing 30k in cash. And what is absurd is that for the additional work I might ask during the construction (kitchen, bathroom, floors etc…) I would need some cash to pay part of it’s and it’s not like I don’t have the funds for it. I have my 3A + 2 pillar, but this type of sale allow me to have access to all the available funds at the end of the construction which is completely stupid as you need assets at the beginning.
Open a vested (a blocked account) in your name at your bank and have the bank issue a confirmation to wir that the sole purpose of this account is to issue payments for the acquisition of your primary residence
Ask wir to wire the money to that vested account
Ask your bank to wire the money to the promoter from that account
I actually doubt that wir can send your 3A money directly to the promoter, in general they have to send it to an account in your name. I actually only know the process that I ve just described. And yes you are totally fine using 3A funds for the downpayment. The only thing that needs to be assured in the process is that the funds are solely used for the acquisition of your main residence and that’s where the bank is required to act as a middle man in the process. The notary could do the same but indeed that may involve locking your funds until delivery because he would not be sure that the promoter will send back the funds to him in case the construction does not take place. If you use a bank on the other hand, that looks safer (while in reality you could face the same issues…)
I had the same problem few months ago for a forward sale in Vaud. Both VIAC and FinPension withdrawal forms (and lets not forget all the documentation to provide) mention that the cash shall be transferred back if the deal is not done.
My notary refused to sign the forms. Indeed, the cash from 3A was to be paid to the seller/construction company without any possibility to get the money back (part of the 20% downpayment). Some notaries may be less risk averse.
An option would have been to keep the cash on the notary account until the final delivery in 18 months. Notary wasn’t helpful on this. I guess it’s “extra administration” for him and he doesn’t want to bother even without the negative interest issue.
At the time, I was really frustrated with this 3A concept (and still are) and did not want to contribute further. They want us to invest for our retirement and as soon as you want to withdraw it within the limits of the laws, the “system” makes it super difficult with never ending paperwork to fill in.
Since then, I transferred all my funds to VIAC (2 accounts only), parking the cash for the future payment to the notary.
For peace of mind, I’ll do indirect amortization with my lending bank. I’ll lose few bips with the fees, but I don’t care. It’ll be easier to manage with one single provider.
After a negociation, my seller accepted a downpayment below 20%. I’ll use the 2A and 3A at delivery.
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