Mortgage - Insurance or bank (including 3rd pilar)

Real Estate
1

Hi everyone,

I have the impression that this topic has not been widely discussed but still very interesting for anyone who would like to buy a house or apartment. I am in that case at least.

I find myself in this situation:

  • With my wife, we will buy an apartment which costs approx. 770’000.- CHF.
  • We looked mostly at banks but also at 2 insurance companies.
  • 1 Insurance company offers lower interest rates but requires a 3rd pilar.
  • Based on many researches in this forum, such 3rd pilar products are not recommended. Lack of transparency, performance, etc.
  • BUT… would you change your mind if the interests are lower? That is the question I need to find an answer to. Maybe you can help :wink:

I got the following offers from 3 companies (the top 3, I contacted others as well):

  • Caisse de Pension de la Poste / Pensionskasse Post
  • UBS
  • Vaudoise Assurance/Versicherung (VD)

I requested the same offer with 2 mortgage slices (‘tranche’ in french):

  • 2/3 with a fix rate, 10 years
  • 1/3 with a fix rate, 5 year

Here is the comparison:

  • UBS: 10 years = 0.93% / 5 years = 0.81%
  • Vaudoise: 10 years = 0.78% / 5 years = 0.52%
  • Poste: 10 years = 0.89% / 5 years = 0.66%

Within the first 5 years, I could save the following amounts if I prefer 1 company over the others (assumption: I pay back my debt every month, direct instead of indirect payments):

Screenshot 2021-08-18 at 20.39.15

The only problem I have with the offer from the Vaudoise Assurance is that they request an indirect payment via a 3rd pillar. The indirect payment is approx. CHF 6600.00.

Based on various offers I got from la Vaudoise as well as other insurance companies, the following could be possible:

  • Two 3rd pilar accounts (1 for my wife, 1 for me)
  • Get insured in case of death, incapacity of work and exemption of paying the ‘prime d’assurance’

At this stage, I am 50/50. It does sound like a smart move. or is it not? With such 3rd pilar, that is what is offered (1 of many similar examples):

  • Annual insurance premium: 3’480.-
  • Saving (épargne): 3’150.- (40% stock market, 60% bonds)
  • Insurance: 329.20.-

The coverage is the following:

  • Capital (death): 117’000.-
  • Incapacity annual annuity: 6’000.-
  • Exemption of paying the ‘prime d’assurance’ in case of incapacity

If I retire as planned in 2055, that is what (= total) I will pay for this 3rd pilar (that’ll be the same for my wife, of course):

  • Saving: 107’100.- (the company guarantees 55’071 which is nothing)
  • Insurance: 11’192.- (this is generally less expensive than buying an life insurance without a 3rd pilar account)

Based on their estimation, the moderate case (performances between 2 and 4%) would generate a capital of 177’810.00.

If I would invest the 3’150.- myself and hope for a return of 3% on average, I could expect a capital of 182’500.00.

Based on these calculations, I do have the tendency to think that the insurance company is not the worst solution.

Do you have another opinions? I would love to hear them! Thanks.

Please note that I will also be a father which pushes me to think about protecting my family in case of problem (illness, accident) :slight_smile:

2

Did you try online platforms such as valuu or broker sich as moneypark or hypoplus ?

3

There is not much difference on the interest payments between the options. So I think you are right to focus on what happens with your capital repayments as this will have the biggest financial impact

I believe with UBS you could amortise indirectly via 3 pillar and invest in their “Vitainvest” funds, similar to what vaudoise propose but without the insurance and possibly with lower costs (ask for the fees for both). So the capital at the end is likely to be higher with UBS, but on the other hand not guaranteed (assuming that vaudoise is guaranteed)

Also if you are employed did you check the insurance that’s included in your employer’s 2 pillar?

What is your logic to take a life insurance plan to 2055? The SNB minimum requirement is to pay down to 65% loan in 15 years.

4

Hi Ardius! I did use Valuu which proposed me very similar offers like UBS and CS. No clear winner so I contacted a couple of banks directly.

5

Hi Barto,

Thanks for your feedback.

believe with UBS you could amortise indirectly via 3 pillar and invest in their “Vitainvest” funds

That is 100% true. Their active funds have a TER between 1.6% and 1.8%. Our contact told us that they will have passive fund starting from this august (I do not know what are the fees).

similar to what vaudoise propose but without the insurance and possibly with lower costs (ask for the fees for both)

Yes. This is true that I do not know what are the fees on Vaudoise side. I need to check this.

So the capital at the end is likely to be higher with UBS, but on the other hand not guaranteed.

Only 50K of the savings are guaranteed by Vaudoise. The ‘plus’ is that I could be insured in case of death or incapacity.

What is your logic to take a life insurance plan to 2055? The SNB minimum requirement is to pay down to 65% loan in 15 years.

My logic is the following:

  • If something should happen to me or my wife, we would (logically) loose a source of income. Please note that we both have a salary between 100k and 115k which is not that bad from our point of view. Still, we try to understand what is best in term of security.
  • The company of our mortgage could then put pressure on us in order to pay back a part of the debt before renewing a contract for another 5/10 years. That is what happened to my father. He was at Swiss Life, which did not wanted him anymore. He then went to Credit Suisse, which required a repayment as part of the contract.
  • A life insurance would reduce that gap (lacune). The 2nd pillar of my wife is way better than mine. You can see a recap below. In case of incapacity (100%), my wife would get between 70-80% of her salary (1st table). In comparison, I would only get between 64-74% of mine.

Screenshot 2021-08-18 at 23.17.24
Screenshot 2021-08-18 at 23.17.24639×601 47.8 KB

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6

Personally I would not take the extra insurance for this, I would instead try to build another pot of savings on the side

If you both went to full incapacity I understand you would still have >120k income from 2 pillar

That’s enough to cover payments on a fixed mortgage on a 700k property

Then after 15 years you should have max 500k debt left (65%). That would still seem like a manageable amount relative to your incapacity payouts (I guess this is why SNB put the 15 year rule)

7

I think it depends on other conditions as well. 0.05% difference would be only CHF 308 per year (considering the 80% of 770k), and I would not consider it as game changer

How did you get this? The best I got was 0.99% for 9 years (UBS)

This makes sense. Reading on this forum, the best solution would be a life insurance independent from the 3a and then decide for direct or indirect amortization.

8

0.05% difference would be only CHF 308 per year (considering the 80% of 770k), and I would not consider it as game changer

I agree with you. But it got me thinking since Vaudoise is at least 0.1% cheaper. That is then at least 600 per year.

How did you get this? The best I got was 0.99% for 9 years (UBS)

This is a special offer from UBS as they told me. What I did is that I told my advisor the interest rate is the most critical parameter in my decision process. He knows that I got better offer from other banks and I used this as a leverage. Please note that he should be read (= no guarantee until today) to even go lower if we offer additional guarantees.

Reading on this forum, the best solution would be a life insurance independent from the 3a and then decide for direct or indirect amortization.

Indeed! I came to the same conclusion after reading a lot of post on this forum.

9

I was in UBS today, and they told me that’s really strange, because why otherwise push in their website and everywhere in the banks the 0.99% in 9 years?
He said, maybe special conditions due to a specific client (=a lot of money in UBS).

At the end I got 0.98% for 10 years (showing what SwissLife proposed for my case)

10

Never ever mix 3rd pillar (savings / investing) with insurances!

If they have an 3rd pillar option to just invest or just save w/o insurance, I’d go for them for the lower interest rate. You’d miss out on the average 7% market gain if it’s only savings (462 CHF) but you’d still save the mentioned 600 CHF per year. Not sure if they offer something like that, insurance company goal is always to trick you in shitty insurance products.

1 Like
11

If you have no better that this, I would suggest you to check the Pensionskasse Post!

12

I need to check that :slight_smile:

I asked 2 insurances to send me the following offers:

  • mortgage without 3rd pilar
  • mortgage with 3rd pilar

Based on previous discussions, it is possible to have separate contracts for the 3rd pilar and the insurance part. I need to dig in since there are many possible combinations. If I can have separate contracts, then I could maybe cancel the Insurance at any time. That is possible with ‘insurance only’ contract.

13

True. There is also the option without insurance, but then the interest rate is not competitive anymore and actually, the low one is only for a portion of the money.
The real advantage with SwissLife is no fee to cancel the contract…but since I’m planning to keep the house…I prefer to stick with a bank. Anyhow in case of necessity to sell the house, then there are ways also with the bank