Buying a house: how to choose a mortgage
What is the mortgage?
Those who want to buy their own house or apartment often can only cover part of the costs with their own capital.
The remaining capital is then financed by third parties, bank or insurance for example – usually with a mortgage.
According to the definition, it is not the credit itself, but first of all the right of lien related to the property. A mortgage is a loan for the financing of a property.
The property represents a guarantee for the Bank. The beneficiary of a mortgage assigns the rights to the property but receives cash benefits in return.
Generally, at least 20% of the property value established by the bank must be financed with its own funds.
This means that it is possible to finance up to 80% of the real estate value with the use of mortgages.
810/5000Of this, a share not exceeding 65% can be financed with the 1st mortgage (1st rank), which must not be amortized, ie repaid.
Another 15% of the property’s value can be financed with the 2nd mortgage (2nd rank), which must be repaid within 15 years or by the time you retire, depending on what conditions are before.
Retirement assets from the second and third pillars can also be subject to an advance withdrawal or a pledge to increase their share.
The second requirement is the sustainability of a mortgage. By this we mean the burden on gross income due to all expenses related to interest and depreciation, as well as for the maintenance of the property.
It shouldn’t exceed one third of the income.
Accessory and maintenance costs.
What are the ancillary and maintenance costs?
If you want to buy a house or a nice apartment in Lugano, for example, you should be well informed about the costs that will arise even before purchasing the property.
As a rule, it is estimated that ancillary and maintenance costs are around 1% of the value of the property.
Ancillary costs include water, electricity, garbage, heating and property care.
Maintenance costs are those for the maintenance of the property, for example for minor repairs and the care of the garden and the surrounding environment.
Generally speaking, all monthly costs for your home ownership should not exceed 33% of your gross income.
How does the credit institution verify the sustainability of the mortgage?
Compare the salary with the costs of the property. Mortgage interest required by the financial partner, the contractually agreed reimbursement, maintenance costs and ancillary costs for the conservation of the property (usually 1% of the market value) are included.
Mortgage rates will remain low in 2020.
In 2020, the Swiss economy is expected to grow by 1.4%, a slightly higher rate than the previous year.
Inflation remains at low levels and the Swiss National Bank (SNB) believes that the evolution of inflation in the medium term will be weak. The SNB can therefore continue to place the evolution of the franc at the center of its monetary policy.
No adjustments to the key rate are currently expected until the beginning of 2021.
Buying a house: how to choose the mortgage how to choose the mortgage to choose.
Mortgage rates, and more generally the universe of finance, are complex to decipher. This is why it is not always easy to make the right choice.
There are three main types of mortgages on the market in Switzerland: fixed rate, variable rate and LIBOR mortgage. When you have decided to buy a house: how to choose a mortgage?
Which is the most suitable for your financial situation and your needs?
- FIXED RATE: If you want to set a definitive budget, the fixed rate mortgage is the one for you, since its rate remains unchanged for the entire duration of the mortgage, usually 5 or 10 years.
- VARIABLE RATE: The variable rate mortgage has an interest rate that varies periodically according to market fluctuations, with the possibility or not of establishing a ceiling for the rate.
With this type of mortgage it is still possible to protect yourself in the event of a rise in interest rates, and a benefit is realized in the event of a fall.
- LIBOR RATE: the LIBOR rate (London Interbank Offered Rate) has a fixed duration but subject to the interbank reference rate. In other words, the rate varies at regular intervals.
This rate can change quite rapidly: it is generally below the fixed rate, but it can rise quite quickly.
How to choose a mortgage in switzerland.
In choosing the right mortgage, financial possibilities play a fundamental role such as risk appetite or the evolution of interest rates expected by the customer.
Often, the best solution is the one that involves combining various types of mortgages to obtain an ideal mix of security and flexibility.
This allows you to contemplate possible – risks of interest rate changes and reduce the risk of having to extend the overall mortgage amount at a high rate.
The Ebuyhouse real estate agency in Lugano Paradiso can help you choose your dream home and advise you which mortgage to choose to buy a home.