Financing your real-estate property
Given the privileged relationship we have with many banking institutions, a solution to finance your real-estate property will be found sooner and more easily.
Your own funds
The 20% rule
The share of own funds you must have should represent at least 20% of the purchase price.
You may have the necessary liquid assets by means of savings, investments, inheritance or, for example, by means of a family loan without interest. If you inherit a plot of building land, its value can also represent own funds, in the same way as liquid assets. Under certain conditions, the personal work you intend to do yourself within the framework of a building or renovation project can also be considered as own funds.
If you are purchasing a secondary residence, the own funds required are in the vicinity of 30%.
Do you need more own funds?
If you do not have enough liquid assets to contribute the necessary own funds, you can also use a partial or total payment of the assets in your pension fund (2nd pillar) or your provident fund (3rd pillar). This capital can be used only to finance the purchase or construction of your main residence, and not for a secondary residence.
Instead of paying in your 2nd and 3rd pillar assets, you can also pledge them. In this way, the money remains in the pension fund or provident scheme account and you still receive interest. Some banks then grant you a higher loan.
Admissibility of your financing
The amount corresponding to the difference between the purchase price and your own funds will be allocated to you by the banking institution of your choice in the form of a loan (mortgage).
The annual costs to be paid by the owner consist of interest payable, paying off of the loan and incidental expenses. These costs should not exceed 1/3 of your gross income.
To make a correct estimate of your future costs, a fictitious loan interest rate of more or less 5% is taken into account by the banking institution. This calculation method makes it possible to guarantee your capacity to keep up with the costs if rates were to rise.
A variable-rate mortgage has an interest rate that varies depending on the situation on the money and financial market. Paying off can be direct or indirect.
A fixed-rate mortgage generally has a term ranging from 2 to 10 years, with an interest rate that remains unchanged throughout the agreed term. The shorter the term, the better the interest rate will be. Generally speaking, a fixed-rate mortgage can be paid off only indirectly, at the agreed due date.
A LIBOR mortgage (London Interbank Offered Rate) allows you to finance your real-estate property while benefiting from conditions regularly adapted to market rates. The mortgage rate is indexed to LIBOR, i.e. the rate at which banks lend money to each other. This is a fixed-rate loan with a due date ranging from one to twelve months. At the end of each period, the rate is automatically adapted to the applicable terms for the period chosen.
To repay the capital lent by the banking institution, you have two possibilities.
Direct paying off
You repay your mortgage debt by means of monthly instalments paid to the banking institution. Your debt is reduced gradually, as and when you pay in your instalments.
Indirect paying off
You pay an agreed amount into a linked provident fund account or a linked life insurance account. The capital saved in this way will be used at a predefined time to reduce the mortgage. By proceeding in this way, you benefit from a constant tax deduction. At the same time, you can deduct the amounts paid into your 3rd-pillar provident scheme account from your taxable income.
To find the solution best suited to your situation, we are able to organise a personal interview for you with one or several banking institutions with whom we have a close working relationship.
During the interview, you will benefit from personalized advice adapted to your needs and wishes.
Please do not hesitate to contact us for more information on this issue.
Checklist of documents to bring for your interview with the selected banking institution:
- Identity document (identity card, passport)
- Residence permit (B or C) (if applicable)
- Most recent payslip
- Copy of your latest tax return
- Debt collection office certificate dating back less than 3 months
- Evidence of 3rd-pillar assets (if applicable)
- Copy of the insurance certificate from the pension fund (2nd pillar) (in the event of withdrawal or pledging of these assets)
- Life insurance policy (if applicable)
- Summary of expenses related to firm commitments (leases, alimony, child support, etc.)
- For self-employed professionals: balance sheet and earnings report for the last three financial years
Documents concerning the real-estate property:
- Extract from the land register dating back less than 6 months (your real-estate broker will provide this document at your request)
- Site plan of the property
- Photographs of the property (inside and outside)
- Sales file of the property, mentioning, in particular, the year it was built, the renovations/alterations undertaken, as the case may be, the living area in m² and the volume in m³ (if available)
- Copy of the fire insurance certificate for the property
- Plan of the property (if it exists)
- For property with co-ownership: copy of the co-ownership regulations, status of the renovation fund, copy of the minutes of the latest meeting of co-owners
- Rental status (only if the property is rented out)
Documents concerning a new building:
- Plans of the intended construction
- Quotes from the architect or developer
- Volume of the property according to the Swiss SIA standard
- Building permit (if it exists)
- Description of the building provided by the architect or developer
- Copy of the contract of the general contractor (if it exists)