First post here, right when I am about to buy a house and therefore choose a mortgage. Thanks for existing!
Here in CH, most people actually do not buy real estate, and the ones who do never pay it back completely. I come from another culture, where debt is best repaid as fast as possible.
People here normally tell me that they do not pay back the mortgage because of the tax benefits: the debt pushes down your taxable wealth and the interests can be deducted from your income. This is something I find hard to understand, because the wealth tax is really low, and the tax deduction you get on the interests is obviously just a fraction of the actual interests paid to the bank. If anyone sees where I am wrong here, I’d like to hear from you.
What does make a difference (especially now that mortgage rates are so low) is to not pay back (or pay back not as fast as possible) and invest the money instead, hoping to reap some 5-6% when you “borrowed” the capital from the bank at the current interest rates of about 1.1% for 10 years.
So, what would you do if you were me? Pay back? Not? How much?
Right now I am thinking of splitting the mortgage in several chunks, each expiring some 2-3 years before the next, such that in the meantime (if I keep working and everything goes as planned) I can save up (part of) the sum and pay it back at the end of the mortgage. I am calculating that in this way I would still be able to save a decent amount to invest in the stock market.
I’d love to hear your stories/opinions!