Leaving Job Voluntarily with Active Mortgage - What are the options?

Real Estate
1

Hello!

We have a 10 year fixed mortgage on our residential apartment in Zurich with UBS. Both my wife and I work, but my income is significantly higher than my wife, and we wouldn’t have passed affordability criteria without my income.

However, I am considering leaving my job to do a startup of my own, which means I wouldn’t have an income for a while. I do have enough assets to pay for the mortgage + interest for another 10 years.

While getting the mortgage, the consistent opinion from online research, Reddit, real estate folks and even some lawyers was that usually banks don’t create trouble as long as you keep paying your mortgage and interest amounts on time.

However, I have got the feedback recently from 1-2 lawyers that you never really know what banks might do, and you are taking a huge risk by leaving your job. They recommended that a better situation is to go talk to the bank before leaving your job, to get an idea of how they feel.

Does anyone have verified opinions or real first-hand experience on this topic?

If I really leave my job, should I inform my bank?

Is there a possibility of keeping the apartment but renting it out, and covering the mortgage + interest payments with rent? I am aware that in that case, we will have to return the 2nd pillar.

I want to get all the information possible before making a decision.

EDIT: After further analysis, I realized that it is likely impossible to not inform them as leaving your job will deactivate your existing 2nd pillar, and you will need to move it to a new place, so the bank will need to be informed anyway.

2

how long is your mortgage term for? the bank will know when salary stops hitting the account. that’s why i put salary into different account from mortgage bank. i suggest you do that.

as for what to do: play through the different scenarios (tell bank, don’t tell bank, they say ok, they say not ok, they don’t find out, they find out): if you speak to your bank and they say “if you do that we’ll cancel your mortgage” what would you do?

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3

yes, the salary account is different for us also. We maintain enough cash in the bank account and transfer money into it on a monthly basis. If the bank says that they will cancel the mortgage, it is a much much larger and impactful decision than if the bank allows us leeway as long as we keep paying our mortgage. It’s possible that in that case I would rather look for another job.

4

when does the mortgage come up for renewal as that is when you have to tell them anyway.

5

that’s a long time. Like 9 years from now. I am ok with having problems at that time, if I still haven’t figured anything out in my career by then.

6

Generally, we can assume a lot of mortgages passed affordability criteria only based on two incomes. In some of these cases, if one of the partners is losing the job (not a surreal scenario), there must be some options for getting a chance to keep the property (RAV, existing assets etc). An instant ask from the bank to get a new job asap or else sell the property, would be too stressful for most people. So, (again assuming) a lead time of 2 years while getting RAV benefits would keep things safe, afterwards might be problematic. There are a lot of mustachians working in banking industry, maybe you can get more concrete answers from them.

7

The worst thing you can do is to ask the bank in advance, you will be putting your own file under the radar.

Without any doubt they will tell you either to put more collateral or pull your loan.

In theory the bank can review your loan capacity at any time. But that rarely happens unless they see a sudden change in your account, like unemployment payments or something to that effect.

My advise would be to switch your salary payments to a different bank and top up your UBS whenever the 3 months payment comes up. Make sure you are always up to date with the payments and most likely the next review period will be a year before the mortage is due.

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8

A bank does not care at all as long as the mortgage payments are made. Nobody checks your account if you have a salary coming in each month.

There is absolutely zero incentive for the bank to cancel your mortgage. Relax.

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9

Do you know what your mortgage contact sais?

In absence of regulation in the contract, do you know what the law sais?

(In case this is totally obvious I’d be personally interested in the answers)

10

The contract covers all bases of course, so it says that if any condition changes on our side, we are required to inform the bank, and the bank may decide to change the mortgage or require a larger payment in that scenario. I don’t know what the law would say otherwise, but when I was getting the contract, the mortgage broker said that if it goes to legal, the bank will almost always win. But from what I remember, he said that banks usually indeed don’t care as long as you keep paying.

11

Thanks for the answer!

Too bad no easy solution then.

Please note: I do NOT have a mortgage, so my thoughts were purely theoretical in nature:

Personally I had loosely planned to forget to inform the bank (were I to reduce work or RE) because obviously I would not think anything substantial had changed as I’d be totally able to pay the mortgage and, comme par hasard, find a new job before mortgage renewal. Well that was my plan so far anyways before knowing about these rules, so the plan might change after a thorough revaluation….

Following along :+1:

12

So if you were to inform the bank, what consequences might happen and with which probabilities and which reactions (e.g. not stop working?) from your side?

Vs

What might happen if you didn’t tell them and they found out? Would the worse case scenario be that they sell your house or that they give you say 6 months to meet the affordability criteria again or…?

What I mean is, I would try to analyse your situation by possible scenarios and probabilities with a special focus on worst case scenarios in both options. Also, is there a third option you haven’t thought about so far?

Maybe find real life experiences of what happened. Maybe some of these cases ended up in court, that might be helpful too.

13

Withdraw 2nd pillar to repay the mortgage?

14

Very interesting discussion.

This goes to show that owning a property (with a mortgage) can hugely affect important life decisions and restrict your personal freedom, while home ownership is largely associated with freedom.

Many home owners are probably not even really aware of this.

Much less of an issue if you rent and pay your rent regularly.

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15

Liquid assets >>> mortgage and at the same bank (less likely to be the case here where IBKR is preferred) otherwise you are your bank’s b*tch.

16

Why at the same bank?

17

rental agreement could also be canceled while (voluntarily) unemployed which might make it hard to find a new (family-)apartment due to low income.

I know some cases where mortgage contract was signed under tight schedule because they needed both incomes but first child ahead and no plans for going back to work jointly 200%. neither of them hand any issues until now.

I would say the bank is interested in making money with you. If you have a mortgage this is the case. If you dont have one, it isnt. They did their due dilligence, you met the criteria and are in charge to mention if this changes . IMHO the bank has no reason to investigate in this. Better even if salary flows to other account - the bank would not have any possible knowledge of your new situation.

And I think even if they find out, they probably wont kick you out asap. I would negotiate some time to get start up rolling or to get a new regular job.

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18

That’s what I thought too…

Yeah all that I find online so far is like “talk to your bank if you lose your job AND risk to not be able to pay the mortgage” ,[highlight by me] so that you can find a solution that allows you to keep the mortgage” :woman_shrugging:

19

Balance of power when negotiating, turning the relationship in your interest.

Of course if you hold liquid assets anywhere else, you have ammunitions as well, but that’s only a smaller threat, their only equation is your real estate and mortgage and contract linking all parties.

20

Not sure that would be legal if one continued paying rent.

However finding a new apartment is difficult for sure!

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