Get the finances right
If you're looking to buy a home, you’ll probably focus first on the financing. That includes the required downpayment as well as how much you’ll pay every year for your mortgage, interest and home maintenance.
Financing the purchase
Bear in mind that you will need to provide a downpayment of at least 20% of the purchase price, and at least half that downpayment must be in cash. You can take out a mortgage loan to cover the remaining 80%.
Mortgage and maintenance expenses
As a rule of thumb, your mortgage and interest payments plus your home maintenance expenses should not exceed a third of your gross annual household income.
Determine your budget
The first step in buying a home is determining how much you can afford to spend. Our advisors will help you establish a budget based on your annual income (including your household salary plus any pension or investment income) and the amount of cash you have on hand for a down payment. They will use a simulator to calculate the maximum amount you can spend on a new home. They will take into account the ongoing cost of owning a home: as a rule of thumb, mortgage payments and home maintenance should account for no more than one-third of your household’s gross annual income.
Income CHF 100 000
Downpayment CHF 200 000
You can afford up to
Update your pension coverage
Calculate a budget for your mortgage and maintenance expenses that is easily within reach, and then determine the additional third-pillar pension insurance that you would need to pay those expenses if something unexpected should happen to you.
We strongly recommend updating your pension coverage so that it can cover your mortgage and maintenance expenses if you should become unable to work, or worse. In addition to an Epargne 3 retirement savings account, you could take out a term or whole life insurance policy that offers disability benefits. That would give you peace of mind, knowing that you and your family are covered should anything happen. Your BCV advisor can review your existing pension coverage and suggest the appropriate supplemental policies.
Minimize your taxes
Buying a home will increase the amount of taxes you have to pay. Under Swiss tax law, a notional rental income will be added to your taxable income, and your property's value for tax purposes will be added to your personal net worth. To help compensate, you can deduct the mortgage interest from your taxable income and subtract the amount of your mortgage loan from your taxable net worth. With all those variables, the method you choose to repay your mortgage loan – either directly or indirectly – is extremely important.
Your regular mortgage payments gradually reduce the amount of outstanding principal and interest on your loan. But, because you will have less principal and interest to deduct from your taxable net worth, your tax charge will rise.
This method can save you money on your taxes. Rather than paying down your mortgage loan, you make payments into an individual retirement account that is pledged to your mortgage lender. Not only does the account earn interest, but the amount of (tax-deductible) principal and interest on your mortgage loan doesn't go down. You make partial mortgage payments periodically from that retirement account, under an agreement with your lender.
Keep in mind: home ownership and your marital property agreement
It's a good idea to keep track of all the money you spend on your home, so you know exactly how much each member of your couple contributed. That will make things easier if you should separate or divorce. This is especially important if you’ve drawn from your occupational pension funds to finance your home.
Couples who marry under Switzerland’s default marital property agreement (joint ownership of property acquired after the marriage) and who buy a home together usually choose to be equal co-owners, even if they did not contribute equally to the purchase.