In order to realize their dream of owning their own home, many rely on a mortgage. Nonetheless, mortgages often raise questions and lead to knowledge gaps that need to be filled.
The bank supports the buyer of a property in financing it, and the buyer then pays back during a specified period of time. This is how a mortgage works in brief. So far so good. But a look into practice shows that mortgages are often more complicated than expected in many ways. For example, certain requirements must be met for admission. “You have to have a fifth of the purchase price as own funds on the high edge”, knows Florian Schubiger from the independent mortgage platform hypotheke.ch. “Good to know: If the lender estimates the property lower than the purchase price, you have to finance the difference with your own funds.”
Small differences – big impact
Mortgages are in vogue: Statistics show that the volume of mortgages from private households has steadily increased in this country. It is all the more important to be well versed in this area. But persistent gaps in knowledge and errors still persist. “Many do not realize that even small differences in interest rates have a big impact,” says the expert. An interest rate optimization of between 0.25 percent to 0.5 percent makes a mortgage of between one million and 5,000 francs a year.
The right provider
When it comes to providers, banks have the edge: 90 percent of Swiss people take out their mortgages from a bank, although other options are also possible, such as taking out an insurance company. But what if the thought comes up that you have chosen the wrong provider? “Also, many do not know that changing providers is basically very easy if you know a few basic rules,” says Florian Schubiger. “For example, you shouldn’t take out multiple mortgages with too long term differences.” With more than 18 months, you can hardly change the provider when the first mortgage expires. The expert warns: “That can be expensive; the current provider then has almost a monopoly. If you cannot amortize, you have to accept almost any interest rate because you cannot change. “
90 percent of the Swiss take out their mortgage at a bank
It’s worth comparing
In order to find the mortgage that suits you best, it is worth making precise comparisons in advance. For good reason, as Florian Schubiger emphasizes: “Because many are not aware that in the current interest situation – negative interest rates – it is not banks that have the best interest rates for many types of financing, but pension funds or insurance companies.” It is important to get as many offers as possible. The fact that gut instinct is often a good, but not always the best, advisor is particularly clear with mortgages. The expert reports: “After the very long phase of low interest rates, many have the feeling that interest rates will always stay that low or even fall further. If you analyze the past, you quickly notice that interest rates – if they do rise – rise rapidly. ” This possibility is also currently available: If inflation comes, sooner or later interest rates will also rise. “Many mortgage borrowers do not have this scenario today,” says Florian Schubiger.
Debt free as quickly as possible – or better not?
Amortize the mortgage as quickly as possible in order to be debt-free afterwards? Sounds like a good plan, but it’s not always recommended. “Many also think that a mortgage should be amortized as quickly as possible,” says the expert. “That’s true up to a certain amount, but then it depends on the overall situation.” It is important to know that you cannot always top up your mortgage again without problems in old age. Florian Schubiger knows: “It happens that people in old age may have a large amount of assets, but these are mainly tied up in the property. That doesn’t make sense because it can’t be used to make a living. ” From this point of view, excessive amortization is therefore not always a good idea.
How a mortgage affects your tax return
Taking out a mortgage also has a major impact on the tax return. With the right know-how, you can also save a lot of money here. “Anyone who has a higher mortgage can deduct more debt interest from their taxable income,” reports the expert. For most of them, the tax is reduced by 10 to a maximum of 40 percent of the debt interest. The expert gives an example: “If interest rates rise by 1,000 francs, taxes are reduced by around 100 to 400 francs; depending on personal tax situation and marginal tax rate. ” The decisive factor in this regard is the personal tax situation. “What is also decisive is what you do with the money if the mortgage is not amortized. If it is in the account in this case, it will bring less return after tax than the post-tax mortgage, ”adds Florian Schubiger. In this case, amortization is worthwhile purely from a return perspective.
Thinking wrong with the tax return
There is also a mistake when it comes to tax returns when it comes to mortgages. “A common misconception is that the mortgage should be about high enough that you can“ cancel ”the imputed rental value in your tax return,” says Florian Schubiger. “This consideration is wrong because the imputed rental value is a fixed variable and cannot be changed even by the interest deduction. The deductible interest does have an impact on the taxable income or the amount of taxes, but this is independent of the amount of the imputed rental value. ” As you can see, if you pay attention to a few important points and obtain detailed information about mortgages, you can avoid tripping hazards and are therefore on the safe side.
Text Lars Gabriel Meier
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