Future mortgage renewals preventing FIRE?

Real Estate
1

Situation: around 2M CHF invested in USA and world ETFs. But have a bit under 1M in mortgages, spread over 3 mortgages: 1 for home I live in, the others for property to rent out (the ETFs give more returns but it’s for diversification)

Each of the 3 mortgages has end date within the next 3 years, and then needs to be renewed.

Currently I’m still working, but if I would stop working now to live off dividends I think I’d be unable to renew the mortgages, because banks will assess income, which is mostly salary based.

The dividends, if they assess this at all for affordability, and the rental income, would be too low to cover the affordability calculation. Even though I would be able to pay interests, plus amortizations on top of that to gradually reduce them, indefinitely with the rental and dividend income.

I don’t think I can wait 3 years longer. What are my options here? Selling half of the liquid stocks to pay off all the mortgages that can’t be renewed would make things worse, the income from 1M in stocks would not be sufficient for the desired lifestyle.

I know that pillar 2 can be used for the property you live in yourself at least, but that’s only a small part of this and in addition gives inflexibility for moving.

Have others successfully managed to renew mortgages during RE? How did this go?

Does there exist any possibility to have mortgages for a rental property while not working?

2

What about getting fixed mortgages for 15 years? Once renewed, they shouldn’t care.

And you might want to have a fixed one in your situation anyway?

3

Some ideas:

  • Banks I talked with for own home considered up to 4% of stocks as income, not only the dividends. Would that do the trick, maybe along with pledging your pension?
  • Will your current bank actually re-assess your income when renewing the mortgages in 3 years?
  • Often, you can renew up to 2 years in advance to lock in the rate. Is that an option if you don’t want to work in 3 years time?|
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4

I think the case for primary residence and rental properties is a bit different

Rental properties

Since interest rates are going down and are already at low levels. Hopefully the rental income right now is enough to cover the interest payments for rental properties.

In this case it would make sense to have a fixed rate mortgage for 15 years and then you are set. In 15 years the ETFs amount would grow (unless bad things happen) you can pay off all the rental mortgages.

Residence
Regarding the house you actually live in. Same logic would apply but then make sure that dividends are able to cover the interest payments.

With close to 45-50% (Debt to Assets) , taking interest rate risk with floating mortgages might be good financially but not for „peace of mind“

P.S -: I don’t know if banks reassess their mortgages even if they are fixed rates if conditions for the person changes

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5

Unless you fix the mortgages for so long that you will repay them during the fix period, you cannot guarantee that. Maybe rates go up 4% and eat up all your dividend income.

One option is to then re-finance on this long term basis.

Another option is to sell a property to de-leverage (assuming you have decent equity there).