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The path to home ownership is a big and exciting step that should be well planned. To make the process easier for you, we at HYPOHAUS have compiled the most important steps in a factsheet.

The process

First, you view the property and express your intention to buy if you are interested. A written purchase price offer is then submitted, if necessary accompanied by a financing confirmation that confirms financial viability.

Once the offer has been accepted, a reservation contract is signed and the best mortgage offer is selected. HYPOHAUS supports you in this process for free by comparing offers from over 60 lenders and negotiating the best interest rate for you.
An account is then opened with the selected lender and the equity is transferred. Once the loan agreements have been signed and the lender has issued a promise to pay, the property is notarised and ownership is officially transferred.

Our factsheet will ensure that you master each step with clarity and certainty. Download our PDF to find out all the details and contact us for personalised advice and a free interest rate comparison.

On the search for home ownership, it is not uncommon to lack the right plot of land or the necessary small change for the perfect home. A leasehold property can be a suitable solution for precisely such scenarios. But what exactly is behind this legal concept? We take a closer look at what it means to own residential property with building rights and what aspects need to be taken into account.

Definition of building right

When purchasing a property with building rights, the buyer acquires the right to erect and use a building on a third-party plot of land for a fixed period of time. The land itself remains the property of the landowner. As compensation for this right of use, the buyer usually pays an annual building lease fee. In order to establish the building lease with legal effect, it must be entered in the land register as a permanent and independent easement. The duration of the building lease can be agreed for a minimum of 30 years, but a maximum of 100 years. When the building lease contract expires, the building lease holder receives predefined compensation (reversion) for his property, which then becomes the property of the building lease provider – unless the building lease contract is extended.

The building right contract

All details of the building right are set out in the building right contract. These include, for example, the scope of the building right (what may be built?), the duration of the building right, the building right interest or the reversion conditions. This contract must be publicly notarized and recorded in the land register in order to be legally effective.

What should be noted in particular?

Building lease holders must consider their personal projects and plans at an early stage due to the clearly defined term. Who the grantor of the building lease is also plays a major role in these considerations. In many cases, the grantor of the building lease is a public sector institution with an interest in extending the building lease early. It is also important to consider how the ground rent is defined and whether it is linked to an independent inflation index.

What advantages do I have as a building lease holder?

As the buyer of a property with a building lease, you benefit from a lower purchase price as you are buying the property without the underlying land. Accordingly, the equity required, the mortgage and consequently the interest charge are lower than for a property without building rights. A building lease fee is payable for the right to own and design the property on the plot as you wish.

Conclusion

All in all, building rights are an attractive and flexible alternative for constructing buildings on third-party land. However, a thorough examination of all aspects of building rights is essential and the use of independent professional advice is highly recommended. This can ensure that all interests are examined, critically scrutinized and protected.

In a world where sustainability and environmental protection are increasingly taking centre stage, green mortgages have gained popularity in Switzerland. These environmentally friendly financing options not only offer attractive interest rates, but also promote the construction and renovation of energy-efficient homes. The MINERGIE and GEAK certifications in particular play a crucial role in this process by providing owners and investors with significant benefits.

What are green mortgages?

Green mortgages, also known as sustainable mortgages, are loan products specifically designed to encourage investment in energy-efficient and environmentally friendly residential property. Banks and financial institutions in Switzerland offer particularly attractive interest rates for such properties in order to incentivise sustainable building and living.

The role of MINERGIE and GEAK

MINERGIE certification is a quality label for new and renovated buildings that is widely used in Switzerland. It stands for high living and working quality, energy efficiency and the reduction of CO2 emissions. A MINERGIE-certified building consumes significantly less energy than a conventional building, which not only benefits the environment but also reduces energy costs for owners in the long term.

The cantonal building energy certificate (GEAK) is another instrument that assesses the energy efficiency of buildings. It shows how much energy a building requires for heating, hot water, lighting and other electrical appliances and makes energy efficiency transparent and comparable. In order to obtain a green mortgage with special conditions, the property must have a respective A or B rating on the scale of A-G from the GEAK.

Advantages of certification

Attractive interest rates: Banks recognise the value of energy efficiency and sustainability and reward owners of certified buildings with more favourable mortgage rates. This can lead to considerable cost savings over the term of the mortgage.

Increase in property value: Certified buildings are not only more energy efficient, but often also of higher quality. This can lead to an increase in the value of the property and make it more attractive on the property market.

Reduction in operating costs: The energy efficiency measures required for certification significantly reduce energy costs. This eases the burden on the household budget and contributes to a sustainable lifestyle.

Promoting environmental protection: By investing in a certified building, owners actively contribute to environmental protection. The reduction in energy consumption leads to lower CO2 emissions and a reduced impact on the environment.

Access to subsidies: In some cases, owners of certified buildings can also benefit from state or cantonal subsidy programmes that offer further financial incentives for energy-efficient construction and renovation.

Conclusion

In Switzerland, green mortgages offer an excellent opportunity to promote sustainability in the construction sector and benefit from financial advantages at the same time. The MINERGIE and GEAK certifications play a central role in this by setting the standards for energy efficiency and environmental friendliness. For owners who want to invest in the future, green mortgages and the associated certifications are an important step towards a more sustainable and environmentally conscious way of life.

Does your property have a MINERGIE or GEAK certificate? Take advantage of extremely favourable interest rates on your mortgage today and contact us for a quote. Our team of advisors will be happy to help you.

In Switzerland, condominium ownership is a popular form of home ownership that makes it possible to own a flat in an apartment block. The question often arises: which areas belong exclusively to us and which are the common property of all residents? Where is our active participation required and where can we exercise our right to have a say? Which costs are borne by the condominium community and which are the responsibility of the individual owners?

When you buy a condominium in Switzerland, you do not acquire the entire property, but only a specific unit within an apartment building or residential complex. This unit can later be sold, inherited or otherwise transferred. The corresponding share of ownership is recorded in the land register and plays a central role in the distribution of costs. As a condominium owner, you not only contribute to the maintenance costs of the common elements, but also to the ongoing operating costs according to your own share.

Focus on special ownership

Special ownership extends to the individual residential unit, be it a flat, an office or a commercial unit within the building. The owner enjoys exclusive rights and can act as they see fit. Changes to the interior design or room layout are permitted as long as they do not affect the common parts and do not violate any laws.

However, the special right relates exclusively to the flat and any ancillary rooms such as cellar compartments, craft rooms or an attic. It does not extend to an outdoor seating area, the garden or the roof terrace, as these external elements are common property. Therefore, the consent of the community is required to make structural changes, such as installing glazing around the seating area.

Understanding your role in the community of owners

As the buyer of a condominium, you are part of a community of owners and hold shares in the common property of the building. This includes common areas, the foundations or the roof, even if your flat is not directly under the roof. These shares determine your voting share in the condominium owners’ association and your participation in common costs. Through this co-ownership, you are bound by the existing regulations and all resolutions of the condominium owners’ association, regardless of whether you wish to participate in certain decisions or not.

The Swiss Condominium Act at a glance

It is important to note that the exact rights and obligations in Swiss condominium ownership are defined by the Swiss Condominium Act (ZGB) and the regulations in the community rules. As these documents can vary from building to building, it is crucial to check the specific provisions for your condominium owners’ association.

The renewal fund and the value quotas

The renewal fund is a financial cushion created by a condominium owners’ association to finance future renovations or necessary repairs to the common property. What many people do not realise is that the renewal fund is not prescribed by law. The condominium owners’ association decides on the existence of a fund and the amount of the contributions to be made. The purpose of the renewal fund is to ensure that the value of the property is maintained. The relationship between the renewal fund and the value quotas is crucial, as the value quotas determine the amount of each owner’s contribution to the fund. An owner with a higher value ratio contributes more to the renewal fund than someone with a lower ratio. This reflects the greater benefit and value share of the overall property.

It is important for owners to know both the status of the renewal fund and their own value quotas. A well-filled renovation fund can not only cover future costs, but also have a positive impact on the value of the property. At the same time, owners should understand their value quotas in order to know their financial obligations and rights in the community of owners.

Inheriting a property often raises a crucial question: should the inherited property be rented out or sold? Let’s be clear from the outset: this decision is complex and depends on various factors.

Renting or selling? A guide

The first step is to carry out a thorough financial analysis of the initial situation. All running costs such as maintenance, taxes, insurance and any mortgage payments should be taken into account. The resulting financial affordability for the community of heirs forms a solid basis for the decision-making process. The tax aspects in particular are of great importance and vary considerably depending on the canton and the individual situation of the heirs. It is advisable to consult a tax advisor to understand the tax implications of both the rental and/or sale options.

The current market situation also plays an important role. If the property market is experiencing high demand and record high prices, a sale could be financially attractive. On the other hand, stable rental demand and a balanced rental market may speak in favour of letting.

The condition of the inherited property is another important aspect. Any renovations or necessary modernisations could make the option of selling advantageous. If the property is in good condition, renting it out could appear to be the more attractive option. Long-term plans should also be taken into consideration. If the intention is to use the property yourself in the future or to pass it on within the family, renting it out could be considered as a temporary solution.

Personal preferences and current lifestyle should also be taken into account. Renting requires a certain amount of support, while selling can lead to a quick goal and completion of the project.

Last but not least, it should be mentioned that inheriting a property often involves a high emotional component. In many cases, the inherited property is personally known to one or more heirs and certain memories are associated with it. Within a community of heirs, the personal connection to the property can also be so different that the heirs attach different emotional values to the property. Such a circumstance can lead to complications in the decision-making process, whether to sell or let, and should be addressed and discussed as early as possible in the process.

In many cases, professional advice is crucial. Ultimately, there is no universal answer and the best choice will depend on individual circumstances. Careful consideration of all relevant factors will help to make an informed decision that meets your needs and objectives.

Our team of experts will be happy to advise you on all aspects of inheriting a property, in collaboration with tax experts and property trustees.

If you want to take out a mortgage, sooner or later you will come across the terms “1st mortgage” and “2nd mortgage” during a consultation with your advisor. Have you ever wondered what this is all about? Or do you already have a mortgage and assume that you are already very familiar with the subject? Then test your knowledge now and find out everything you need to know about these two terms in today’s blog post.

Splitting the purchase price into the 1st and 2nd mortgage

As part of the credit check, the bank divides the financing of a property into a so-called 1st mortgage and 2nd mortgage.

The 1st mortgage: up to 65% loan-to-value ratio

If you contribute 20% of your own funds to the financing, you have a classic financing structure with a mortgage of 80%. The mortgage is divided into the 1st and 2nd mortgage. The 1st mortgage is the loan amount up to 65% of the market value of the property. This part of the mortgage does not necessarily have to be amortized (repaid).

The 2nd mortgage: up to 15% loan-to-value ratio

In the above example, the difference from 65% to 80% is the so-called 2nd mortgage and therefore 15% of the market value. This is the sum in Swiss francs that the customer must repay to the bank over a period of 15 years (amortization), which can be paid directly or indirectly. You can find out more about this in this blog entry.

Special case: Pure 1st mortgage financing

If you already have 35% or more equity at the start of the financing, you start directly with only a 1st mortgage and there is no amortization obligation towards the bank. From the bank’s point of view, this type of financing is very welcome, as it involves less risk due to real estate price corrections. There are banks that pass on this lower risk to customers in the form of better interest conditions. If you have more than 20% equity, it is always worth calculating the scenario with your advisor. Depending on the case, the improved interest conditions may be so attractive that it may be worthwhile to contribute more than the 20% equity.

Frequently asked question: Is there a difference in interest rates between the 1st and 2nd mortgage?

No. Nowadays, banks no longer differentiate between the interest rate offered on a 1st or 2nd mortgage. It used to be common for the bank to charge a risk premium for the 2nd mortgage. Nowadays, the bank issues a standardized interest rate offer for the entire mortgage amount, which simplifies the calculation for customers and keeps the costs correspondingly lower.

Do you have any questions about mortgages? We will be happy to help you.

The decision between renting and buying: making an informed choice

The choice between renting and buying a property is a crucial milestone in adult life. Making a well-considered decision that takes into account many different factors is of great importance. In this blog post, we will thoroughly analyze the advantages and disadvantages of renting and buying real estate, with a particular focus on the impact of interest rates. Our goal is to assist you in your decision-making process by providing you with comprehensive information.

Renting a property offers a certain level of flexibility, which can be of great importance to many people. Especially for those whose professional or personal path involves frequent changes, opting to rent can be advantageous. For example, if you live in a city where job opportunities shift rapidly or if you have plans to change your place of residence in the near future, renting provides a liberating option. It grants you the freedom to easily adjust your residence without the need to deal with selling a property.

Furthermore, renting a property does not require substantial initial investments. Typically, only a security deposit and monthly rent payments are needed. In contrast, buying a property often demands significant financial resources, such as a substantial down payment and the ability to secure a mortgage. Particularly, young adults or individuals with limited income may find this financial hurdle to be a significant burden.

Despite these financial aspects, buying a property offers long-term financial benefits. When you purchase a property, you build equity and have the opportunity to benefit from the appreciation of your property’s value. Over the years, the value of your property can increase, providing you with solid long-term financial security. Additionally, buying a property allows you to customize and personalize it according to your preferences, imparting a sense of stability and ownership.

Interest rates play a critical role in the decision to buy a property. The level of interest rates can have significant implications for the overall cost of the purchase. Low interest rates typically result in more affordable monthly mortgage payments. This can make buying a property seem attractive at a favorable time, as you may have to pay less interest over the loan’s term. However, it’s important to be aware that interest rates can rise, leading to higher mortgage payments.

It is also important to consider the volatility of the real estate market. During a housing bubble, the value of your property can sharply increase.

Questions?

Do you have any questions on this topic? Our team of experts is here to assist you.

Introduction

What are the risks of buying a house and the associated mortgage?
The average debt per capita in the form of mortgage loans in Switzerland is a multiple of the respective assets. It is obvious that this circumstance is associated with considerable risks. What these risks are and how you can prevent and counteract them, you will learn in today’s HYPOHAUS Blog contribution.

The interest rate risk

The financial crisis of 2008 has driven central banks around the world to lower interest rates to record lows. Many borrowers became painfully aware that this was not a permanent state of affairs in 2022, when the interest rate turnaround was initiated. More than ever, this period has shown that addressing the mortgage model you choose is key and can help avoid nasty surprises. Regardless of the model, it is advisable to set aside an amount for personal household budgeting in addition to the regular interest payments due, in order to be able to absorb any future interest rate increases. Furthermore, it is advisable to find out about the current interest rate environment and expected developments early on when mortgages are due, as interest rates can be fixed around 18-24 months in advance.

Risk of high maintenance and ancillary costs

The costs associated with owning a home are not limited to mortgage interest alone. Incidental costs such as electricity, water, gas and ongoing maintenance work can quickly turn the household budget upside down. In order to be able to precisely calculate the expected costs in advance, it is advisable to consult an expert, especially for people without the relevant expertise, in order to be able to make an estimate.
In addition, ongoing provisions can help to cover unexpected renovation costs. As a rule of thumb, an annual reserve for ancillary costs and necessary renovation work amounting to around 1.00% of the property value is well advised. In the case of larger investments, an increase in the existing mortgage should often also be considered in order to prevent liquidity bottlenecks.

Risks of life events such as illness, accident, job loss, death

It can happen that the income situation of a household changes completely at once due to illness, accident, job loss or death. This can lead to a situation in which it is almost impossible to cope with current mortgage expenses. To protect yourself against this situation, it is important to deal with the undesirable scenarios in a detailed consultation when taking out a mortgage. An individually tailored insurance solution can ensure that in the event of one of the aforementioned scenarios occurring, the accustomed standard of living for the family can be maintained without restriction and the liabilities in connection with the home can be serviced. If you are interested in a consultation on this topic, please contact us. Our pension experts will be happy to advise you and show you the possibility of securing interest payments, amortization and/or the repayment of a mortgage via a lump sum on death. For a personal consultation, you can submit a request here.

Risk of affordability in retirement

Retirement is usually accompanied by a reduction in income – but the costs associated with owning a home often remain the same. Although most mortgage lenders already ensure at the time of conclusion that the mortgage amount at the time of retirement is still at a maximum of around two-thirds of the loan-to-value ratio, this initial situation can be cause for lenders to reassess creditworthiness.
To ensure a carefree start to the third stage of life, various tips should be followed. Planning for retirement at an early stage is essential to ensure unrestricted enjoyment of one’s own home in retirement. In addition, comprehensive advice on the mortgage product and term as well as the lender is essential. There are huge differences between institutions in this regard, which mortgage borrowers often only become aware of in retrospect.

Risk of the market value of the property

There are many reasons why the value of a property can decline: An attractive view is impaired by construction projects, a new road runs directly along the property line, or the neighborhood loses its attractiveness. Significant adjustments (both positive and negative) in property value can also have an impact on your mortgage. For example, if the loan-to-value ratio is reduced, the lender may demand an extraordinary reduction in the mortgage. To prevent such scenarios, it is advisable to keep a constant eye on the real estate market and the immediate surroundings of the property. A valuation of the property from time to time is also advisable so that early action can be taken in the event of an undesirable trend.

Questions?

If you would like us to advise you on this topic, we look forward to hearing from you. Your HYPOHAUS team of experts.

The use of pillar 3a to provide for home ownership

The pillar 3a of retirement planning offers the possibility to use the saved capital for the purchase or financing of a home. This blog post explains the rules, opportunities and risks of this form of retirement planning and explains the special features of Pillar 3a.

Pillar 3a: Save taxes and provide for the future

Pillar 3a is a private, voluntary pension plan in which money is regularly paid into an account, custody account or pension policy. The saved capital, including returns, is paid out at retirement age. It serves as a supplement to the mandatory pension pillars AHV and pension fund, which cover about 60% of earned income. Pillar 3a closes this financial gap and makes it possible to maintain the accustomed standard of living in retirement.

Pillar 3a and its special features

Pillar 3a is a tied form of pension plan in which the saved capital can usually only be withdrawn 5 years before the regular retirement age. This contrasts with free pension provision with pillar 3b, where savers can dispose of their money at any time.
The state supports the tied pension form of pillar 3a with tax relief. The amounts paid in can be deducted from taxable income, resulting in temporary tax savings. When the 3a pension assets are withdrawn (whether early or at retirement age), capital withdrawal tax is due. The tax rate varies depending on the canton, but is in any case lower than the income tax rate.
The withdrawal of pension assets and income are taxed independently of each other, and the tax progression is applied separately. The more pension money is withdrawn in a year, the higher the tax rate for the capital withdrawal. However, there is no risk of moving into a higher income tax bracket and suddenly having to pay tax on the entire income at a higher rate.

The use of pillar 3a for home ownership

One of the main exceptions for an early Pillar 3a withdrawal is that the money can be used to buy, renovate, refurbish or pay off an existing mortgage on owner-occupied residential property.

Advantages of an early withdrawal

• An early withdrawal offers the advantage of having more liquid assets available to reach the required 20% equity, reduce the mortgage and lower the interest burden. When deciding how much 3a retirement money to put into a home, the following two calculations must be considered:
• The more equity contributed, the less borrowing required and mortgage interest paid.
• The less mortgage interest paid, the lower the deductible amount from taxable income, resulting in higher tax payments.

Legal provisions for early withdrawal

The following provisions apply to early Pillar 3a withdrawals:

• Early withdrawals are only possible every 5 years.
• Partial withdrawals are only allowed up to 5 years before the normal retirement age (men: 65 years, women: 65 years). After that, only the entire assets can be withdrawn at once.
• The assets withdrawn are subject to taxation (capital withdrawal tax).
• Repayments are not possible, in contrast to the 2nd pillar (pension fund).

Pledging as an alternative to early withdrawal:

Instead of having the pension assets paid out for home ownership, it is also possible to pledge them. In this case, the credit balance remains on the pension account and savings contributions continue to be paid in. In this way, the credit balance can continue to generate interest income or appreciation. However, the mortgage lender has the right to access the credit balance if the interest and amortizations cannot be paid.
Often the pledged credit balance is also accepted as collateral for a 2nd mortgage. A 2nd mortgage is required if the borrowing requirement exceeds approximately 65% of the fair market value of the property. The 2nd mortgage must usually be repaid within 15 years or upon retirement at the latest. However, by pledging the Pillar 3a, less or no amortization may be required. In this case, the lender will want to continue to access the balance in the future if property values remain constant, even if interest and amortization have been paid.
The pledge serves as additional security for the mortgage lender. As a result, better terms are usually granted on the mortgage. Some lenders even treat the pledged 3a credit as equity and are willing to finance residential property beyond the usual 80% of the market value.

Advance withdrawal vs. pledging – An overview

Advance withdrawal:

• Lower interest burden -> less deductible interest -> higher taxes.
• More equity -> lower mortgage -> lower interest burden
• No repayment possible – Only the annual maximum amount can still be paid in.
• Reduction of retirement assets
• Early burden due to capital withdrawal tax

Pledge:

• More debt capital -> more deductible interest -> lower taxes
• Possibly higher leverage (even above 80%)
• More borrowed capital -> higher interest burden -> higher affordability hurdle
• Less or no amortization of the 2nd mortgage
• Risk of pledge realization
• Retirement assets remain intact for the time being (possibly amortization upon retirement)
• More debt capital -> more deductible interest -> lower taxes
• Continuous interest/value increase of pension capital
• Continued insurance coverage, if applicable
• No payout means no taxation for the time being

Concluding decision to use 3rd pillar for home ownership

If you are unsure whether and how you should use your pension capital to finance a home, it is advisable to contact the independent experts at HYPOHAUS. We can help you with this and many other questions relating to mortgages and pension provision.