This sounds counter-intuitive to me. If the area develops with better, new buildings, shouldn’t your property also be valued more? (I am thinking about a house, potentially interesting for developers to demolish and rebuild).
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It should as the whole area gets more attractive.
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I guess it goes both ways. If the parcels around your realty get pimped up, the desirability of the entire neighborhood increases. Land value goes up.
But if the area gets too built up, the value will decrease.
And the building itself surely loses value over time. Preferences are changing, you get new modern construction competing with your old house.
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I agree. We signed a 5y fixed rate at 0.71 when saron was 0.6-0.8 depending on the provider. Nice deal I think.
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10 years mortgage is less flexible when you want to sell, but there is still the chance that the new owner is going to take it, especially if the interest rate is 1-2% less
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[quote]
Now interest rates do go up to 5%, you lose your job, you can’t afford to keep paying 60k per year. [/quote]
This scenario is pretty much unrealistic. With such a liability on your hands, one would:
- do everything to stay employable
- keep a large enough cash buffer to avoid such a situation (and with RAV together a 6-months buffer can actually hold around 3 yrs easily)
- when your cash is gone, you can still take out margin loans or sell the liquid assets you have
Selling the house from above your head would not just be unresponsible, but it would also very much shake up everyone’s life around you too much.
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this is the American Way.
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Off topic but I’m seizing the opportunity to underscore that mortgage leverage applies to the whole portfolio: keeping a large cash position means that money isn’t invested in riskier positions (the mortgage reduces the ability of its responsible owner to take risks with their other assets) and having to sell stocks when shit hits the fan means that the mortgage isn’t linked only to the house (which is illiquid) and that more liquid assets can also have to be liquidated at an inopportune time to pay for the mortgage, albeit on a voluntarily basis.
On the flip side, that indeed means that the rest of the portfolio also enters into play when choosing Saron vs fixed (and the term of it).
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might be the wrong correlation.
people who buy property are usually the ones with family, wanting a stable place long-term.
those will not easily move because of childcare, kindergarten, school and the friends of the kid(s).
even if I will never own the flat I’m renting, I’m reluctant to move from here cause this is the only place we have roots and some IRL social network in Switzerland.
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this is only implied, I never said that 
Selling assets is usually not the best thing to cover the daily cash-flow, but your stocks might actually be on a really high valuation, so it’s good to reduce your exposure, etc… if that’s not the case you can still go for margin loans. But again, your normal “employability net” built by Switzerland would catch anyone quite nicely, so any liquidation would only come as option Nr3 or later…
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I said it.
Having a mortgage puts you in a different situation than not having one. At some (admittedly very rare) points in time, it might put you in a position where selling beaten down stocks is the better alternative for your specific situation.
Taking on additional margin on stocks increases your risk exposure should the market keep declining and your personal situation not be fixed, making the “oh crap” scenario not that much unlikely anymore.
To stay on topic, I argue in favor of not focusing on low interest rates alone. Especially if you are early in your career or marriage. A lot can happen.
Buying/selling is a months long process that involves tax offices, brokers, banks and notaries. Not to mention previous owners or prospective buyers who can be a pain in the neck. It’s time consuming and financially expensive.
People who own will rather stay stuck with a crappy job or long commute in their own home than sell the place and move elsewhere.
For high earners this probably applies less than for people whose main asset is their home.
Check if going with a mortgage with
- SARON, or
- no penalty cancellation, or
- shorter duration
is not a better option.
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Comes with a premium and I don’t know if there are many options.
That’s probably what I would try to do, ideally a duration that would cost just a bit less than the guaranteed return of the 2nd pillar.
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Saw this a bit late – is it possible in CH to remortgage after having paid down? It is possible to remortgage for reconstruction, upgrades etc.
But, you could reborrow against original value? or value at the moment f the new mortgage?
You can borrow for renovations that maintain or increase the value of your house that’s not a problem. They will do another valuation for that but in general you have to wait for 2 years after you bought a realty to get an updated (higher) valuation. However If the value decreases they will take the lower value.
Not a specialist, but what I read is following.
When you take a mortgage, bank/financial administration create a “mortgage record” that states how much you can borrow against your property. Normally this value is just equal to your mortgage. If you repay it, partially or full, it is recommended to keep this “credit line”.
If later you want to borrow against your property again, it is relatively easy to increase your mortgage up to the already existing limit. If you want to increase your “mortgage limit”, it is a different level of administrative complexity and requires for example revaluation of the property and creation of a new record.
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This is commonly called a line of credit. It seems it is not the norm in Switzerland in the B2C business (could not find anything about it).
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I also have no experience with this. Just know that the Tesla youtuber that I’m following has a few flats around Sydney and he recently had them re-evaluated (to the upside) and then he maxxed out his LTV on all of them to 80% and used the money to buy TSLA stock. So this kind of thing works at least in some jurisdictions.
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A friend borrowed CHF 80k on his flat and the raiffeisen told him he was free to do anything with.
There is some retirement strategy, for example : Comment améliorer votre retraite grâce à votre logement en propriété | VZ Vermögenszentrum
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I can confirm this statement partially. When we got our house and mortgage we went to the maximum mortgage that we could afford with my salary (the mortgage is „only“ 65% of the property price). However, some years later after switching jobs and getting a good raise, we wanted to get a cooling unit within our existing heath pump system and asked for additional 50k which the bank (in our case swisscanto) provided without any evidence of doing something with it. In the end our current system was not allowing us to add the cooling system and we ended up with some additional ETF‘s with that money.
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