Mortgages: Own funds are indispensable for any financing
Once you have found your dream home, the search for optimal financing begins. Because few can pay the entire purchase price from their own assets, in order to fill the gap, a mortgage is needed. However, due to the strict legal requirements, not the entire sum can be covered by external funds. The mortgage must be supplemented by own funds.
Own funds must be equal to at least 20 percent of the property value
The amount of money that you have to raise yourself is calculated using the property value of the property in question. It forms the basis of the mortgage. The required own funds in the amount of at least 20 percent of the property value must be contributed by yourself. You can use the following sources:
- Private assets: savings on your accounts
- Proceeds from sales: co-ownership of real estate, securities, art, antiques or other valuables
- Family support: donations, inheritance, personal loans
If there are not enough own funds: Retirement savings can be taken into account for the mortgage
Pension funds from the 2nd and 3rd pillar can be included in the calculation of the mortgage and are regarded as own resources. However, a number of provisions have to be complied with in the early use of retirement benefits. For example, since July 1, 2012, at least 10 percent of the total has to come from sources other than the 2nd pillar. You have two options for the early use of retirement savings:
- Early withdrawal of retirement savings
- Pledge of retirement savings
Early withdrawal of retirement savings
The early use of retirement savings is regulated by law. An early withdrawal is possible both on a pro rata basis as well as to the full extent. The minimum amount is CHF 20,000. Conditions for occupancy: the advance withdrawal serves to finance self-occupied residential property – the purchase of a secondary residence or rental property is not possible. In addition, the written consent of a spouse or registered parter must be included.
Limitations: If you have not yet exceeded the age of 50, you can use the entire amount saved prematurely. If you are older, you can only access the savings obtained by the age of 50 or half of the current amount. In this case, the higher amount will be paid out.
Pledge of retirement savings
The second option is that you pledge your entitlement to retirement benefits. In this way, the own funds can be increased for the mortgage. When pledging, basically the same criteria as for an early withdrawal apply, such as the limitation by the age 50.
Pledged retirement assets are subject to other standards than early withdrawn assets when it comes to their valuation as own funds. As the pledged benefits are not actually paid, the mortgage sum remains the same. This is why the interest burden for the pledging option is higher. However, when pledging, one can take advantage of tax benefits which are not available for the early withdrawal option. In addition, pledging retirement savings might allow you to get a mortgage higher than the usual 80% of the property value. You might also get a reduction on your interest rate when taking out a mortgage in the 2nd rank because you have deposited an additional security.
With MoneyPark you will find the optimal mix of own funds for each mortgage
The biggest advantage of an early withdrawal: Since the amount is paid out and can actually be used, the total amount of the mortgage decreases, which results in reduced interest charges. However, an early withdrawal is taxable. Other than in case of an early withdrawal, your retirement funds and the insurance protection of the 2nd pillar remain the same when pledging.
MoneyPark finds the best mortgage rates and defines together with you the optimal financing strategy for your project. How you use your own funds best is also one of the topics that we discuss with you. Make an appointment today and benefit from independent, in-person advice.
Current mortgage rates
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