I have a mortgage with Credit Agricole Next Bank on a second home in France (in Swiss francs, on a typical swiss mortgage structure)
When we set up the mortgage, we agreed that I would repay the principal until reaching 50% equity in the property.
I believe the property has now reached or exceeded that 50% equity mark (I built the property from the ground up, and it’s market value is considerably higher than the build cost/mortgage value).
Could anyone explain how the process typically works to stop paying the principal component?
Thanks for any help! I’ll obviously speak with my bank, but I wanted to get a sense of how it works and how complicated the process might be (is it like redoing the whole mortgage?).
The bank will run a valuation (CA uses Wüest Partner). In most cases, the principals in fixed term mortgages will not be adjusted - after the contract it expires, it can be excluded.
In such cases, it makes sense to split the mortgage in two tranches; e.g. LTV of 50% in a 10y term contract and the remaining 16.7% (if I remember right, the max. LTV at CA for holiday properties is 66.7%) in a shorter term contract (just an example). Principals are mostly linked to the contract with the shorter period. Meaning, once this contract ends, you just have the longer mortgage left with no principal. Or you can just stay in Saron, afaik, CA has a framework contract of 2y.
Most banks do not adjust the valuation within three years after end of construction; even if you move to another bank, the bank uses the investments costs as a basis as long as the magic barrier of 3y did not pass by, yet.
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