Buying a house in Switzerland
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Before entering the housing market, you should have a clear idea of the property you want
- Type of property: Do I really want to buy a house, or would an apartment be more practical in my situation?
- New building/ existing property: Do I prefer to purchase a new-build property, or would an existing property be sufficient?
- Size in square meters/ number of rooms: How much space do I need for my family? What is the minimum amount of land required? Is my family likely to increase in the foreseeable future? Or alternatively, will my children soon be leaving home?
- Property location: Would I like to live in a quiet, rural area and buy a farmhouse, or do I prefer the excitement of city life with its shopping and variety of entertainment? How important are transport links and proximity to my workplace? What does the plot of land on which the detached house or apartment building is located actually look like?
- Particular must-haves: What is there that I cannot do without? Must the detached or terraced house have a garden, a breath-taking view, or special architectural features? Do I need a room with special facilities (a hobby room, for example)?
- Property financing: What is my current financial situation? Can I afford the asking price? What funds do I have available, what type of mortgage is most appropriate, and how do I find the best deals?
Once you have answered these questions, you will not only have a clear idea of the property you want, you will also be better equipped to narrow down your search. You are likely to view several properties before you actually buy a home. During this process, you are likely to make compromises and abandon some of your original criteria, either because your dream home lacks the desired number of rooms or is the wrong size, or else because you come to realize that some real estate which falls short of your ideals, nevertheless has many redeeming features.
Buy a family home with the right financing
Purchasing a property raises the question of optimal financing arrangements. When granting mortgage loan, financial institutions will require the fulfillment of two basic criteria: the affordability must not exceed one third of the gross household income, and the loan-to-value ratio ration may not exceed 80% of the purchase price of the property. But what does this mean in practice? In the case of affordability, the maintenance costs of the mortgage, i.e. interest payments, amortization and ancillary costs, are calculated and expressed as a proportion of the gross household income. This acts as a practical assessment of whether the mortgage holder can afford the mortgage payments. The loan-to-value ratio, on the other hand, describes the relationship between the purchase price of the property and the owner's own funds: Because banks, insurance companies and pension funds only grant mortgages up to a maximum of 80% of the property value, the remainder of the purchase price (a minimum of 20%) must come from your own financial resources.
- Fixed-rate mortgage
- Saron mortgage
- Variable-rate mortgage
With a fixed-rate mortgage, an agreed interest rate is charged and remains unchanged over the entire loan repayment term (e.g. 10 years). Thus, whilst the mortgage holder is protected against the risk of rising interest rates, he will be unable to profit from falling interest rates. The advantage of the fixed mortgage is that it offers stability and financial predictability. The LIBOR mortgage, which is currently the most favorable option, is adjusted in accordance with the LIBOR (London Interbank Offered Rate – the benchmark interest rate for inter-bank loans on the financial market) at intervals of 3, 6 or 12 months, depending on what is specified in the mortgage contract. The LIBOR rate changes over time, which means there is a risk of higher interest costs, but also the chance that interest rates will fall. The variable-rate mortgage (also known as an adjustable rate mortgage) is the most expensive form of mortgage loan, especially in the current low-interest rate environment, and is mainly used for short-term interim financing. Its advantage is that it has no fixed loan repayment term.