Mortgage Options

[chrispappas12]

I have a few questions on better understanding mortgages in Switzerland for financing a property for staying:

If the down-payment is 35%, I can only take the first mortgage for the 65% of the property’s value. I only have to pay interest “for ever” and avoid amortization. Most mortgage calculators from bank portals don’t make the distinction very clear.

• What does “for ever” mean? If I get a fixed-rate mortgage does this interest apply for life? I see fixed-rate interest rate mortgages mostly associated with the second mortgage.

• If the first mortgage has a fixed interest rate for a given term (e.g., 10y), what happens after the 10years? Do I get then a fluctuating interest rate according to the market?

• When can I refinance the first mortgage? If interest rates drop can I negotiate a new mortgage with the same or another bank before the fixed interest rate term (e.g., 10y). That wouldn’t make much sense.

• If the value of the property increases, can I negotiate a new mortgage to get 65% of the increased value and keep the difference between the old mortgage value and the new one for investing in the market?

• What’s the maximum amount that can go to downpayment from Pillar 2/3a? Is it half of the total downpayment of 35% or is this capped to half the downpayment, assuming a downpayment of 20%?

[Burningstone]

@chrispappas12

What does “for ever” mean? If I get a fixed-rate mortgage does this interest apply for life?

That would be amazing In this context “forever” means, that it is common in Switzerland to never pay back your first mortgage. But you won’t be able to lock-in a certain rate for the rest of your life instead you renew the mortgage after the term is over and get a new rate for the next term based on the rates at that point in the future.

@chrispappas12

If the first mortgage has a fixed interest rate for a given term (e.g., 10y), what happens after the 10years? Do I get then a fluctuating interest rate according to the market?

You either make a new fixed mortgage for e.g. another 10 years or you take a variable mortgage at market rates.

@chrispappas12

When can I refinance the first mortgage? If interest rates drop can I negotiate a new mortgage with the same or another bank before the fixed interest rate term (e.g., 10y)

You can do this, but you’ll pay a hefty penalty for it. The terms depend on the bank that gives you the mortgage.

@chrispappas12

What’s the maximum amount that can go to downpayment from Pillar 2/3a? Is it half of the total downpayment of 35% or is this capped to half the downpayment, assuming a downpayment of 20%?

At least 10% of the house price need to be paid from “hard” cash, meaning not from Pillar 2. If you pay out the pillar 3a to finance a home, it counts towards “hard” cash.