Would you like to buy a holiday home in the near future and are wondering whether and how you can finance it. Since the rules for holiday properties are not the same as for owner-occupied residential property UBS recently published an online article explains what needs to be taken into account when financing. For example, buyers must provide a higher level of equity and cannot rely on pension funds.
Source: UBS
Source: UBS
UBS explains this by saying: “The lower loan-to-value ratio is due to the greater risk of default for the bank. When owners are in financial difficulties, their holiday home is the first thing they sell, often even for less than the purchase price. … Unlike with owner-occupied property, you cannot use capital from your occupational pension (2nd pillar) or tied personal pension (pillar 3a) for holiday homes. This makes financing more difficult. In the affordability calculation, the financing contribution is calculated using an imputed interest rate of 5% per year, as is the case with owner-occupied homes. This is to ensure that the financing is on a solid basis if interest rates jump. Annual amortization and maintenance and additional costs are also taken into account.”
According to the bank, holiday homes are also sold more quickly than residential properties. It therefore recommends planning early on how long the holiday home will be used in order to plan the mortgage repayment periods. Otherwise, additional costs and fees could arise.
For anyone who wants to calculate whether they can afford the holiday home of their dreams, UBS here an online calculator available.
Source: UBS
Tax aspects should also be taken into account when buying, as owning a holiday property affects your income tax, as the rental value of the second home is added to your income. In return, you can deduct mortgage interest and maintenance costs from your income.
UBS study: Vacation rental market
According to “UBS Alpine Property Focus”, Swiss holiday homes have become almost 4 percent more expensive last year. Find out more about the situation on the second home market in 33 Swiss holiday destinations. If you are interested in the entire publication, you can download it download here as PDF.
