The smarter choice: Mietkautionsinsurance (rental guarantee) or Mietkautionsdepot (security deposit)?

Banks, Insurances & Third Pillar
14

Thank you for having open this thread, I’m currently in the same situation. I’ll move to a different apartment in a few months and was asking myself which one to chose between insurance and security deposit.

I was considering the insurance as for our current situation with my girlfriend, we will both have news jobs in December and January (for her) and we will have to pay maybe for 1 to 3 months two rent :sweat_smile: (we are in discussion to take our new appartement in January or March and we already terminate our current appartement for the end of March.

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15

Thinking more about it: if you have/consider to have any mid-long term cash deposit - bonds, mid term notes, etc - of a comparable duration, than depositing money as a rental guarantee is attractive, as you avoid paying premium for a comparable guarantee insurance. If you are decided to have only cash buffer and long term stocks/pension plan/etc investment, then rental deposit insurance is an option if the rest of calculations works out.

16

And I have just remember one more idea that I saw in older posts. Financial difficulty? IB to rescue! The idea was: take a loan at IB (currently 2% p.a. I guess) and use it for the security deposit. You can keep it or you can pay it back according to how you feel.

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17

I think those insurance are so expensive because the target are people who don’t have any cash reserve and are more likely to default on it.

If that’s not the case for you, you could probably get a cheaper loan (e.g. margin)

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18

From the renter’s perspective, using a rental guarantee insurance is like taking a loan. You pay interest (premium) and you have to reimburse the principal (any money they have to advance).
Usually the interest (premium) is quite unfavorable and it should be possible to find better alternatives.

Frankly, I consider this service to be a borderline scam that shouldn’t be allowed. It shouldn’t be ok to offer insurances that don’t actually cover any liability. They should be clearly labeled as loans/debt. Imagine having to pay vehicle or medical insurance only so the claim is paid upfront, but then you need to pay it back :clown_face:

Rants and personal opinions aside, I blocked my own money for the deposit, as I find this to be an insignificant optimization on the scale of FIRE and an unnecessary risk.
Worth noting, many household insurances cover the majority of unintentional damages that could come out of your deposit.

You probably already know this, but just in case: if you find a willing and solvent renter you can liberate yourself from the lease “anytime”.

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19

Yes, I know :slight_smile:

To be complete about our (my girlfriend and I) situation: my girlfriend just find a new job in Bern recently, like, one week ago. She will start on the 1st of January. Initialy, we’ve planed to take our new appartment in March and to pay 1 extra rent for this month. However, with this good news, we are currently negotiating to take our appartement in January, and the organization would become a mess in a really short time. Finding a new renter would be hard, but not impossible.

Interesting point of view on which I cannot disagree. People’ opinions about this topics are gold in this time. Thanks a lot.

20

On the subject of margin loan vs insurance:

I’d like to point out that interest cost is tax deductible, while insurance is not.

So at a marginal tax of 30 % a margin loan at, say, 3 % would have an after tax cost of 2.1 %.

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21

I was thinking as well about the Mietkaution recently. I decided that I will take the current amount which I have locked in the Mietkaution as marginal loan from IBKR. You pay 1.5% interest rate, still much lower than all this shady Mietkaution companies. I will invest it in the market, but even if you dont invest it its much better than the 4-5% rate these companies are offering.

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22

Interesting :face_with_raised_eyebrow:… i wasn’t aware of such an offering at IB. I’m intrigued. What are the terms for taking out a loan at IB at these interest rates?

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23

It’s a long story, you better start at the end :roll_eyes:

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24

this could provide a much better return, (~7% on average) covering the costs of the annual premium (~4%)

The 7% are speculative, while the 4% are 100% sure.

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25

Have you guys tried Axa? I used to pay around 3.5% there.

26

I guess the % is aligned with interest rates increase. And they did increase by .5 / 1% over the last year.

(Axa seems to be at 4% now)

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27

To bring something constructive to @rombob.

We were able to obtain a modification of our lease with my partner. We will move in January instead of March 2023. Finally, we also decided to open a rent deposit savings account instead of paying an insurance premium.

Our thinking: we have some money saved up, rather than losing money by giving it for free to an insurance company that will turn against us if necessary, it is better to “separate” ourselves from a certain amount of money that will be used to cover costs without having to pay extra via insurance premiums.

In our case: 6’420 CHF.

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28

Well happy new year and congrats on the new appartment/jobs! Out of curiosity, where did you opt to open up the rental deposit account?

My partner and I moved in together april 2022. Until then I was always paying the “insurance” for my own place, didn’t have the cash. She and I decided to go the deposit route this time. At the time the only bank which seemed to offer some interest and was free was Bank Cler (for canton de Vaud), at a whooping 0.01%, - so we opened up the rental deposit account there. I just received a notification this week that for 2023 they increased the rate to 0.20%!

We also see the money set aside as already allocated for the day we might want to purchase a house/appartment together, we can use it to finance it, or we can use it to buy furniture, and with the interest maybe buy a nice bottle of champagne to celebrate :stuck_out_tongue: (given that we get 100% back after moving out from the rental of course :slight_smile: )

29

I did the same with my 6 week deposit.
It cost 20chf to open a deposit account at BCGE so it was worth it for me.
I account it as cash in my portfolio.

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30

Thank you for the greetings !

We didn’t look about which bank security deposit account had the better interest. Since we are both with Raiffeisen and because I like to see each of our account with the mobile app (E-Banking), we go with them. It was a total mess to open it :joy:

So we just get straight forward to our daily bank.

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31

The rental agency usually does it for you, at least in my experience.

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32

It wasn’t my case for both of our apartment. Maybe a specific thing in the german side :thinking: or from a specific agency?

33

Same here, we’ve never had the choice to choose where we want to have the rental deposit. It was always the landlord or rental agency that decided it.

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