I think it depends on your situation. If I were single, I’d be happy to YOLO it and worse case live in a car.
With 2 young kids, I have a responsibility to provide some safety and security - even if I were to be dead. Which is why I also pay for life assurance even though I hope not to use it.
Of course, these are legitimate theoretical thoughts and conclusions based on world politics. So far I have not seen any numbers that show me a massive impact on Swiss inhabitants. Personally and based on my historical view, I would also predicts that the impact will be a few more individual hardships (which are of course very sad and regrettable) but that most people’s daily lives will not be massively affected by these events. It’s just not possible to reliably predict the future, especially predicting the rare downfalls. But of course, everyone is free to have one’s own assessment.
Fully agree. Working already provides a lot of insurance in case of death (1st and 2nd pillar insurance). If I had kids and my own home with a mortgage I would probably also add life insurance. To me, this would be enough to provide safety and security. Again, very personal decisions, everyone should find their right individual solutions.
For those looking to FIRE with kids and mortgage, the work insurance will of course disappear and so this needs to be considered too on FIRE and also on loss of employment.
Correct. A very specific scenario, applicable once you are fully FIREd. My guess is that the other scenario (insurance through employment) applies to many more people, even in this forum.
Correct, but different scenario since you, more likely than not, have unemployment insurance which also covers death.
Only those who fail to FIRE or happy to go without insurance.
I think failure is quite a strong expression. To me, the great aspect about FIRE is that there can be a multitude of options. One of them is to completely stop working and live 100% off your investments. Another one can be to reduce your work load or take on a completely different work, giving you less salary money but still providing some security and insurance through 1st and 2nd pillar.
But aren’t you already insured through your capital (which covers the cost of living including you in a FIRE situation).
The first one maybe, the second one never. You lose about 5% in opportunity cost per year for holding this long term (vs. stocks). And there are so many nets to catch you before you even touch the later part of that 200k. And it is highly uncertain that 200k can catch what 36k did not.
The interest is irrelevant, because of interest rate parity. The long-term expected total return of currencies is equal and normally only slightly above inflation.
You can buy Turkish bonds for 30% p.a. and make a lot of money if you really believe otherwise. The academics can’t beat the crystal ball.
Regardless, that means that the current 2.4% EUR interest and the current 0% CHF interest have actually the same expected return. You just pay taxes on the former, and have FX problems from holding EUR but spending CHF.
Well, for me, FIRE involves RE. If you don’t RE, then it is just FI.
Hey there,
I am locking in on a flat, not really the FIRE thing to do but it looks nice and I might get it rather fairly priced (since nearly a year on the market since it is in the high tier, and the owner wants to sell fast now). By accidend I learned the owners paid 890’000 CHF in 2008 (construction year). The owner is a widow which got dementia and moved to a care facility, a lawyer is handling her affairs as a Beistand.
I am aiming to get it for 1.1 MCHF, top tier building, attika flat with 5.5 rooms (140m2 + 140 m2 terrass). No real issues with the building now, just kitchen appliances getting a bit old and a heat pump (both 18 yo). For the heat pump, the building decided to go from individual air/water heat pumps to central groundprobe heat pump few months ago, I can buy myself in for approx 20kCHF + individual adaptation cost. I am still checking if cooling is possible with the new system. That is a steal (or how mutualising cost is so beneficial). Another fact is that it is on a private street which will need desperately repairs in the near future. I am still assessing the cost, but should be in the low tens of thousands maximum if done right by mutualising costs with the local utility company (for which I am working).
Basically it is give it a paint job, some grinding on the terrase woods and you can move in without any issue (even the grinding outside would be rather optional). I can do both myself with the help of family. The Erneuerungsfonds looks good as well.
Now for the mortgage. First I wanted to put 35% down, I have the cash easily available and I prefer to have just one Hypothek to ease up my life. This would mean 385’000 down, 715’000 CHF morgage. Assuming 1% Zins now, this would mean 7’150 CHF/a interests + 26’950 CHF/a opportunity costs (7% return assumed), so TC of financing 34’100 CHF/a.
I am also checking the option to pledge my 2nd pillar, which gives around 2% return now. I have around 145’000 CHF in it. There is where I am not totally sure if I understood it right. This would mean a mortgage of 860’000 CHF, and only put cash down for another 240’000 CHF. Is this correct ?
If yes , this would mean interests of 8’600 CHF/a, and opportunity costs 2’900 (145’000 @ 2%) and 16’800 (240’000 @ 7%) CHF/a → total cost of financing is 28’300 CHF/a.
Of course I did some sensitivity analysis, but considering my total wealth available (just about 50kCHF shy of the full buying price), I think I should be able to get close to the minimum interest rates (has anyone actual numbers on that ?)
Can someone guide me on how it works practically ? I tell the lender I want to pledge the 2nd pillar, I sign some paperwork and thats it ?
Thanks for your insights !
Yes. That’s right.
Which city is the flat in?
The number of mortgages can be chosen by you - what people call 1st and 2nd hypothek often just means 1st part with amortization period (15y by FINMA rules) and 2nd part (indefinite mortgage).
Those aren’t actually 2 seperate hypotheken and if we consider opportunity cost and your total wealth, you might want to consider paying only 20% down in your case, if it was based on the misinformation that you need two mortgages.
If you just want less headache, then sure - both options would work. Your assesment of pillar 2 pledging is correct as well.
Rather a town, Brugg AG, 30 Min by train to Zurich, about 40 to Basel and Bern is in the same range. Every half hour, all direct.
Don’t want to stretch my leverage, that is why I want to go with 35%. Then the amortisation is done and gone and I can just go on living my life. If interest rates go up again, I am able to get the leverage down even further.
Nice deal, although the price sounds like outskirt value, but big flat nevertheless… Chapeau!
what do you mean by outskirt value ?
Let’s see if I can convince the seller with the price.
Just noticed, I think I made a mistake there:
The interests is correct, but I messed up the opportunity cost. If I pledge my 2a instead of using cash, I have an upside of 7% on that part (the pension fund is a security but still earning me 2%, and I can keep 145’000 CHF more invested.
This means 8’600 CHF/a interests, and only 16’800 CHF opportunity cost (I have to take only 240’000 kCHF out of my invested money, the rest stay the same) → total cost of financing is 25’400 CHF.
EDIT: Raiffeisen just called, and they said if I pledge, I still have to amortize the 145’000 within 15y.
?
What is your question about point 6?