Yeah, my words were not correct. I meant amortization as paying off the mortgage after the mandatory part.
Indirect ammortization is something I’m not too keen on. The last time I checked the fees were atrociously high (indirect 3a via life insurance).
So are we certain, paying off a house/flat doesn’t make sense?
As far as I know, amortization through indirect 3a via life insurance is not the only alternative available…
But you are right the fees are extremely high, however as I mentioned it is not the only alternative 
First of all, there no such answer as yes or no, it depends on your situation, on the interest rates, on the stock market, on the impact of your death or the death of your wife/husband on your financial situation.
I just like to remember that my father use to pay 8% interest for the mortgage of our house. 
For the sake of completeness, you must have 20% in equity to be able to buy a house/an appartment. But in this case, you have 15 years to amortize 15% and reach the 35% equity (obligatory). Alternatively, if you pay 25% upfront in equity, you have 15 years to amortize the residual 10%.
I amortized directly into cash-based 3a at UBS for the first 3 years of my mortgage (also at UBS).
I now switched to direct amortization and my 3a to VIAC. One thing I did not want to do is have my amortization-pledged-3a in stock funds (UBS offers up to 75% stocks).
In case of a market crash, the likely outcome is a double whammy (loss of investment value and loss of apartment value) and a proportionally increased risk of margin call.
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I have to amoritze to go down to 65%, but when I will refinance I will go up to 80% again. The money you get for a mortgage is extremely cheap. I do not know any other way to get money at rates so close to libor. And your investments should yield more than you pay to the bank, therefore I take us much money for the mortgage. Just ensure not all your money is in real estate, it may crash and then you need to be able to present some cash
Well, your other investments might crash at the same time and then you would still have to take a loss if you do not want to sell the house (at a loss). I plan to slowly repay back my mortgage, at least down to 50% within my 10 years mortgage.
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put 400’000, but you buy a flat worth 1’200’000
I keep looking at examples like this in regards to the original thread title.
In general I think that working more than 25 years just to pay down a house is crazy. Its just a structure of bricks with colorful paint on it.
And that 25 years is based on yearly savings of 30000 which I dont think most middle income families have so they will probably have to work more than 30 years to pay that thing off. Some don’t even manage that and they retire with a mortgage at 65 and then have trouble refinancing.
When I hear stuff like this I just keep shaking my head. Its just a house, you probably dont even need all that space.
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There are a lot of negative feedback to buy a house, which I do not agree fully.
When we got the 2nd child, we had to move from our smaller rented flat to a bigger one in 2008. The rents for a 4 room flat in Zürich with a certain standard were above 2,5k. So we checked the alternative to buy something.
Financial numbers: We didn’t had much cash, so my wife and me we put a total of CHF 200k from our PK as a part payment. So since then got a house with 6,5 rooms. Have a mortgage of 550k and pay around CHF 350.- a month with 0,8% interest rates. The bank did not ask me to amortize, still I put the allocated money aside to invest. As I am working in a financial institute, I even receive 1% mortgage payback from my company every year extra.
Personal: Life quality did enhance massively. There is a small garden, where you can grill in the summer time with friends. You have 2 parking garages and enter directly to your home. We did some adjustment in the planning and installed a laundry chute (Wäscheabwurfschacht) instead of the fireplace stove, which was a genius decision when you live on 3 floors and just can throw you clothes down to the basement. You hear no neighbor above or below (except you own kids) and enjoy your little castle in the evening when playing music a bit louder with a beer or glas of wine in your hand.
A decision to buy a flat/house is really a personal one and depends where you are in your phase of life. From the naked numbers, usually buying is a less good decision. But as @Bojack explained, maybe the parents might contribute, or you plan to have a lot of kids and need more space. But the number don’t reflect the convenience and for me clear enhanced quality to do when or whatever we want in our home.
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Thanks for your update. Can you say where your home is? You only say CHF 2500 vs CHF 800 this difference will be mainly due to location
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How much would it cost to rent the house you have? How much does maintenance of the house cost per year?
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And how much are you missing on what you could make per year with the invested assets?
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It is about 15km in the north of Zurich.
This I could tell you actually precise. The architect build 14x “Reiheneinfamilien” houses. 7x to sell at 2008 and 7x for rent. My house did cost 640k (“schlüsselfertig”), but we put in several upgrades (Miele kitchen, wood floors, extra bathrooms, security doors/windows, garden…). So our house did cost 750k.
The architect did rent the other part of his investment for CHF 2’700.- per piece. Now after 10 years those rental houses were offered and sold on the market for around 1m. They had the similar initial price as mine 10y ago.
Mostly you calculate 1% of the house worth to put aside for maintenance work. But what I did is to put my past flat rent money aside. So there is enough in this bucket. In the past 3 years, we had to replace the washing machine and fix the dishwasher, nothing really big.
Bevor I bought a house I had 1000 thoughts what could go wrong and if I could manage maintenance and the costs. And truly, all my fears were massively exaggerated. All in all, this was one of my best financial decisions of my life.
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Good question… As most of the money (actually all CHF 200k) was coming from the PK (2nd pillar), which has a current interest rate of 1%, I lose at the moment CHF 2k per year. Because the 2nd pillar money is fixed for retirement, if you buy a house, leave the country or start a new business.
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I always thought you could only take 50% from PK, the other 50% have to come from other sources to get a mortgage in CH.
That is correct and changed around 2012. Since than, only 50% of the own house funds can be from the pension fund and the other 50% needs to come from your cash savings, securities, Pillar 3a funds.
Correction: Cortana is totally right.
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No.
You need 10% hard liquidity (cash, 3rd pillar, shares, whatever). Everything on top of that can be taken out of your 2nd pillar.
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Hi all,
Before investing in Real Estate I look at 2 things: rental yields, and financing options.
In Switzerland, yield are tragically low and banks and regulations make it very hard to finance large parts of a project.
All in all, it makes Switzerland a pretty poor investment candidate in my humble opinion.
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Just to push here a bit into the other direction or maybe I do have a blind spot in my thought process? Bought a house in 2008.
Price House = CHF 700k
Own Money = CHF 200k (PK money > “dead money” very low interest rates)
When I look around for a similar object in a close-by and similar location, they are priced and sold around CHF 1,2m.
So technically did I double my investment money (200k) in the past 10y?
As long I can remember, Swiss real estate was always expensive. Especially during the 90s and when we bought real estate it was expensive too. But Switzerland has only limited space to live and a kinda constant high number of people (CH&Int) capable to buy houses. Just google real estate indexes in CH, they are going mostly up. But please correct me, when I see that wrongly.
Prices fell by 30-40% in the 90s. The past 10 years aren’t really indicating the long term gains on real estate in Switzerland.
There is a good article from Tagesanzeiger with Gerd Kommer on that topic in German: https://pdfhost.io/v/WokY7jbYD_TA_GES_20190715_009.pdf
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