sure. My understandig is, that OP had the obligation to insure this risk, that UBS asked for it.
I mean, they have their collateral, if OP or his spouse fail the agreed payments.
Additionaly death is only one of many risks to fail your financial obligations…
If it was a dealbreaker argument for UBS, they are now kind of double insured on OP’s cost.
If it was OP’s choice/wish I agreed with you
this is inaccurate. If your LTV is at 66% or below, you do not have to take out a second mortgage, and you also don’t have to amortize.
For you it is probably late, but I would definitevly check what happens in this case with your pension fund, since the good ones have pretty good coverage for “Witwenrente”. Did they ask for that information or not in your case ?
No, they did not.
If I am not mistaken, B permit holders with EU citizenship can.
Yes Indeed and the illustration is also wrong, the 2nd mortgage is not 15% of the 80% but rather 16.67% : for instance taking a 1.000.000 house you borrow 800.000, the 2nd rank tranche is 133.333,33 while the first rank will be 800.000 - 133.333,33 = 666.666,67
Also, (I think this was already mentioned) the distinction between the type of equity funds is not correct. The “Swiss Banking Association” makes the distinction between core funds (cash, savings, 3rd pillar) and non core funds (2nd pillar). The requirement is that you need to bring in a minimum of 10% of core funds as part of you equity but there is no limit to the amount of non core funds that you can bring, i.e. you can withdraw the entirety of you 2nd pillar if you wish to as long as you brought 10% in core funds. When it comes to pledging there’s also a huge difference: pledged core funds do not need to be paid back while non core funds need to, i.e. if you pledge your 2nd pillar while your equity is below 33% you will have to continue paying back while a 3rd pillar pledge will count as direct equity. If you have consequent savings in a 3rd pillar that are pledged you can actually ask a bank to give you a mortgage for more than 80% of the house value: If I pledge for 10% of the value of the house and provide 10% in cash I can get a 90% mortgage (provided that I have a sufficient income to cover the affordability requirements).
For some banks the 1st morgage ist until 65%, for some 66%, for some 66.67%.
The regulatory rule is 2/3, cf source below. Aside from Raiffeisen who left the ASB and have more flexibility I’ve only seen this rule being applied for primary residencies. OP calculation is based on his UBS experience and they also apply the 2/3 ratio, this can easily be checked from their online mortgage simulator.
In 2013 we got a single mortgage for 90% (10% down + 10% 2nd pillar pledge) – our bank told us they’d re-evaluate after 20 years. They pushed for having the 3rd pillar with them, but accepted us declining that offer.
It was clearly stated that their assumption was that increase in value over two decades would bring loan/value ratio down below 66% without a problem.
Without paying back the 2nd pillar pledge ? The rules were different in 2013 as a change w.r.t amo and equity type came into force into 2014, if yes that might be the reason why you could do something like that. Today I doubt this would be allowed, at least you’d be asked to pay back until you reach 2/3 of equity and indirect amo with 2nd pillar pledge is not possible.
I have to say , whatever is the final Mortgage to Asset value ratio, it is a very good deal for the bank. Mortgage values of 80% of the NAV and going down to 67% makes it very low risk for banks.
Market crash of >30-40% would be needed for banks to actually lose money on these mortgages in CH.
Am I understanding this right?
If we had a market crash the bank could ask homeowners to amortize more or bring in more equity to cover the gap. The banks would only lose money if there are actual foreclosures because borrowers are no longer able to pay the interests on their mortgages (what happened in the US in 2008) and they have to liquidate properties ^^. Can such a scenario happen in CH ?
Yes, the propability is/was just low. In recent times it has risen though since the banks don’t press the requirements as hard since they still want to make money but less people meet the mortgage criterias because of elevated prices. Didn’t someone on this forum post that between 30-50% of new mortgages didn’t meet the affordability criterias?
Normally in such cases the banks just ask you to amortize faster but if there is no money in a crisis the people are not going to amortize…
The unthinkable? It did, sort of… wind back 30+ years:
… Die Konsequenzen spürt insbesondere die Schweizer Bankenlandschaft. Reihum kollabieren Banken. Das erste Opfer ist die Spar+Leihkasse Thun. Von 625 Banken 1990 schliesst bis 1995 jede dritte ihre Pforten. Besonders betroffen sind Regionalbanken. … Der Immobilienmarkt steckt mehrere Jahre im Rückwärtsgang. Der Wert von Renditeliegenschaften halbiert sich in den sechs Jahren nach 1991. Der Tiefpunkt wird erst 1997 erreicht. Für die Gesamtschweiz beträgt die Leerstandsquote über alle Segmente gesehen 2,8% – in einem Jahrzehnt hat sie sich versiebenfacht.
Thanks for the link, very interesting. This story from the same collection is completely crazy, I have never heard about it:
The main issue in CH is that price to rent ratio is very high. This simply means that most returns for investors come from price appreciation. This is specifically true for larger cities like Zurich. But most places have low gross yields.
From 1970 to 2024 the average price increase in CH is approx 3% but there have been periods where this increase was much higher. One of them was the period leading up to the real estate crash. I notice that in UBS real estate bubble criterion, >15% increase in 5 yrs is considered one of the measures. Some data on price trends
I am not sure if the stricter lending criteria, higher capital gains tax (for short duration ownership) and imputed rents are somehow discouraging buy to sell behavior or not
But the key issue for me is that the system encourages people to never pay their debts completely, this means for investing criteria, the math of returns on equity is more important vs return on asset value. And this is very vulnerable to interest rates
The following YT clip is losely fitting this topic. The Nigerian Sean Ilogu makes it sound so easy to invest in real estate and work with banks to get leverage in Switzerland.
News for ZH homeowners - taxes (imputed rental value) to go up from 2027:
Auslöser der Neubewertung waren zwei Gerichtsurteile. Gemäss denen sind viele Liegenschaften im Kanton unterbewertet.
Because in other cantons this is not the case? Lmfao
Sure, but these verdicts most likely were rendered by local courts (not federal court), so they would only affect affairs in the canton of ZH. A ZH court cannot order municipalities in e.g. BE to reassess values of homes.
I believe this study was done for all cantons by Wuest and partner. Most likely others would also adjust at some point