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There are many preconceived notions when it comes to real estate finance. We are confronted with this every day. But what is it really about? Today we ask Silvio Benkert, MoneyPark branch manager in Chur: What are the differences in the financing of conversions and renovations? What should I put attention on?
You have lived in your home for a few years or you may be about to buy one. However, part of the property is outdated and needs renovation. The question now is, from what resources should the renovation be financed and what influence does one or the other have?
In principle, liquid own funds can be used for both value-preserving and value-adding renovations. These investments can also be partially covered by the mortgage.
Value-preserving renovations can be made from taxable income subtracted from. Renovations that retain their value include renovating a facade or replacing an old washing machine. Whether you spread the planned renovations over several years or do everything collectively in one year, it depends on your individual situation. The tax law allows you a flat maintenance deduction of ten percent on the imputed rental value. If your property is more than ten years old, a 20 percent discount is even possible. It is therefore not the best practice if the effective annual costs are congruent with the flat rate.
Tied funds, such as those in the second and third pillars, can in principle also be used for value-adding real estate financing. A noticeable appreciation of the property takes place through value-adding investments. To name a few examples: the installation of a completely new kitchen or the expansion of the attic. Investments that add value can have an impact on taxes if, for example, systems with renewable energy are installed. Value-increasing investments can also be taken into account for property gains tax when the property is later sold.
Pension funds, i.e. the second pillar, are somewhat more precise in handling real estate financing for renovations and have different requirements. For example, a minimum advance withdrawal of 20,000 Swiss francs is specified and is only possible every five years. It is advisable to clarify this with the relevant pension foundation in advance.
Whether it makes sense to withdraw pension funds always depends on the respective situation. The staggered withdrawal of pension fund assets in this way speaks in favor of advance withdrawals. Although the advance withdrawal causes a capital service tax, you break the progression when withdrawing the regular pension. If you plan to buy pension funds, you are unfortunately restricted. The early withdrawals must first be repaid before any purchases can be made into the pension fund.
You can see that when you renovate, you are not only spoiled for choice when it comes to reading out the materials, but also with the financial strategy. Since you cannot and do not have to think of everything at the same time, we are at your side with advice and action on matters relating to mortgages, pensions and taxes.
Silvio Benkert
Filialleiter Chur
[email protected]
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