I guess it’s a recuring question among FIRE, once you retire ou get fully self-employed/independent as side income and live on your investment. Your income might be low or zero but your wealth quite high with good returns.
In this scenario, how would you buy a house/appartement without blocking all your asset in it?
It would the primary residence and something that is really hard to find as rental or at a very high rental price, not worth the rental option.
For example, you have more than 1MCHF in cash, stock, crypto and others assets that might have a long term average return above the mortgage rate (let’s say 1% as an easy example).
You want to buy a 1MCHF real estate for living in it and put only the minimum down payment of 200kCHF, to keep the 800k invested with better return and only sell the bare minimum of your asset.
But to get a 800k mortgage your would need 180kCHF of income and you have let’s say 100k (you get this as a couple and one or both working either as as independent or part time).
Solution is buying when you still work. If you can afford not paying the downpayment.
Pledge your assets 2nd and 3rd pillar preferably, a little bit of stocks with Lombard loan if needed
Fix your rate for 10y.
In 10y your home should be 15% more expensive for the bank (at least normally)
Your wealth should have increased, the bank could but would not force you to sell then I guess. Risk exists but is limited.
@gravel I have a similar question to the original poster. Rather then do a 10 year fix, could you simply go for a SARON mortgage? I guess then it keeps on rolling-over indefinitely without the need to go back and re-negotiate with the bank after a fixed 10 year period for example.
I´m on SARON now, and wonder if/when I quit my job will I be forced by the bank to sell my property?
Well you are supposed to them your situation have changed when you quit your job. But otherwise how could the bank know if your salary didn’t arrive by them?
Having a Saron without fixed contract might be OK as it could last forever normally. Anyway if it’s a really low margin bank could cancel the contract to increase their margin so the risk is not 0.
It’s not common but not impossible. If the RE prices around your place drops the bank might be also re-check your loan.
It’s really borderline but if you live below your means, have a modest mortgage and have plan B I think it’s a playable game but riskier than with a 10 or 15y fixed
Thanks for the answers. As I understood, there is no real solution beside starting while the income is high and trying to hide the situation when there is a lower income later.
The risk is not that they force you to sell, but that they don’t renew and force you to buy the house back as you have enough to do it, or at least renew with a lower mortgage forcing you to put more down payment later on, which might not be the worst if your investement performed well during these 10 years already.
It’s kind of strange that you can not somehow lock your stock in a special account as a second warranty, the house is already the first garantee and chances that the real estate will worth more (in Switzerland) is pretty high, at least the risk that it drop more than 20% in value is super low. On top of that if you lock like 500kCHF of VT ETF or even some BTC as a second warranty, would make such lending almost zero risk for the lender. Real estate market would need to crash > 20% AND stock market > 50% AND the borrower would need to have no other cash, stock, crypto to sell (outside of the ones locked in the contract) to default on the lender.
It would be similar as locking and reimbursing to a 3a VIAC 100% stock, isn’t it?
@PhilMongoose I guess my translation is that in fact I have a 25 year contract, but since I am on SARON product it’s really only valid for only 2 years?..
How would you read this? Thank you!
(at the time of taking the mortgage we were just happy to get it all sorted on SARON, I didn’t really consider too heavily at the time the consequence of low-income / high net worth → FIRE).
You anyway need to amortize to around 65%. I think some institutions may allow you to lock stocks away, but I’m not sure what discount they would require. I guess they need to allow for stocks to drop, say, 50%.
“Les Tranches a taux d’interet variable sont de duree indeterminee”, this is a SARON loan, so this is variable interest rate and doesn’t have an end date (besides the contract end date).
Okay, so the SARON is for 25 years, and the 0.8% margin is valid for two years. Got it! Hopefully they won’t ask me to show my tax return every two years.
I’m guessing (hoping) that the rate just rolls over automatically. At least that’s what has happened following the first two year period.
By reading and partipating to this forum, you confirm you have read and agree with the disclaimer presented on http://www.mustachianpost.com/
En lisant et participant à ce forum, tu confirmes avoir lu et être d'accord avec l'avis de dégagement de responsabilité présenté sur http://www.mustachianpost.com/fr/
Durch das Lesen und die Teilnahme an diesem Forum bestätigst du, dass du den auf http://www.mustachianpost.com/de/ dargestellten Haftungsausschluss gelesen hast und damit einverstanden bist.
