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An early withdrawal from the pension fund is a common way of obtaining the necessary equity capital for the purchase of residential property.
However, various legal rules must be considered, which we would like to point out in this blog entry.

General information on pension funds:

The pension system in Switzerland is based on three pillars, whereby the pension fund, also called occupational pension, belongs to the second pillar.
It is compulsory in addition to the first pillar (AHV) and aims to ensure basic provision in old age. In order to ensure basic provision, monthly contributions must be paid, half of which are paid by you and the other half by your employer. Self-employed persons have the option of making voluntary BVG contributions and thus turning to a pension scheme of their choice. In addition, the saved capital is exempt from income and wealth tax in all pension pillars.

When is an early withdrawal from the pension fund possible?

In principle, occupational pension funds can be withdrawn upon retirement, but at the earliest at the age of 58. If the employment relationship is continued beyond the retirement age, then the withdrawal can be postponed until the age of 70.
In some cases, however, second pillar funds can be withdrawn early, which are:

• Financing owner-occupied property – this includes purchase/construction, renovations and amortisation of the mortgage.
• Starting a self-employed occupation
• Leaving Switzerland permanently
• Early retirement
• Event of death

What should be considered when making an early withdrawal?

When making an early withdrawal from the pension fund due to the purchase of owner-occupied property, you must consider that at least 10% of the market value comes from other sources than the 2nd pillar. The advance withdrawal from the pension fund is also granted if you actually have sufficient liquid assets available for the equity portion. Furthermore, it must be mentioned that partial withdrawals are possible at most every five years and that the minimum amount per withdrawal is CHF 20,000.00. On top of that, the conditions for early withdrawals from the age of 50 are more strictly regulated depending on the pension fund institution.

Finally, it should be mentioned that the early withdrawal of pension fund assets leaves a gap in retirement benefits and thus has a negative impact on the pension. In addition, the amount paid out is subject to capital gains tax. It is very important to weigh up the advantages and disadvantages of an early withdrawal, as there is also the option of pledging the pension assets rather than withdrawing them directly. In both cases, you should deal with this topic in advance and seek discussion with the appropriate contact person.

Please feel free to contact us, we will be happy to explain the various options to you.

The energy crisis triggered by the war in Ukraine could have expensive consequences for homeowners in Switzerland.

Rising prices and scarce resources require a serious look at one’s own energy consumption – especially in the current and upcoming season. In view of a possible energy shortage in winter, the federal government has already launched a campaign presenting simple tips on how to save energy. What you need to look out for and what measures you can take are also presented in the current blog entry:

Typical energy weak points:

Did you know that poorly insulated roofs leak more than 20 percent of the heating energy from the house? A poorly insulated exterior facade is also one of the largest sources of heat leakage. In general, windows, roofs, heating and electricity are among the typical energy weak points in houses. Furthermore, heat loss often occurs during heating and hot water production, which is why any deficiencies should be remedied by means of renovation.

Calculate your energy efficiency:

Based on the factors mentioned above, it makes sense to take a look at your own energy bill and investigate any energy losses. An assessment of energy efficiency can be made by comparing houses of a similar type and size. However, it can also be worthwhile to hire a real estate expert who can analyse the energy efficiency in your residential property and make professional optimisation suggestions. The energy requirements can also be determined by the canton in which you live by means of a so-called combined building energy certificate (GEAK).

This is how you can save energy:

Thermal insulation, switching to renewable energy or choosing a modern heating system are efficient methods of saving energy. In addition, LED lighting as well as energy-efficient appliances are considered a welcome investment. However, you can also save energy with simple methods such as reducing room temperature, proper ventilation, turning off unused appliances, keeping radiators clear and turning off lights. Not only can you save energy and money, but you can also do something good for the climate and the environment. You can find more simple tips on the Confederation’s campaign website. Click here for them.

Finally, it can be said that planning any renovations is the be-all and end-all. You should think about taking the necessary measures in advance so that, for example, no unexpectedly high costs can arise due to the complete failure of radiators. Last but not least, renovations go hand in hand with an increase in value and long-term maintenance of the property’s value and higher savings potential for heating, hot water and electricity. But even simple methods can save energy and, above all, costs, which should be important for all homeowners in times of energy crisis.

What do I need to consider before taking out a mortgage and how can I find the right financing solution for me?

Many future homeowners do not have the necessary know-how on the subject of home ownership, which is why they may feel overwhelmed before they actually take out a mortgage. This is not surprising due to the many sources of information and since taking out a mortgage involves a lot of money and responsibility, the financing should be well planned in advance and the costs calculated correctly. Following and sticking to a few important tips and tricks when taking out a mortgage can protect you from unpleasant surprises, which is why we have summarised the most important points for you:

Pay attention to the most important key figures:

Affordability and loan-to-value are two of the most important factors in the mortgage world and you should know and understand the meaning of these key figures. The loan-to-value ratio describes the ratio between the mortgage and the market value of the property as a percentage. It tells you how large your mortgage is in relation to the purchase price or the lender’s property value assessment. As a rule, most lenders finance owner-occupied residential property up to a maximum of 80 percent of the market value, which means that you have to contribute 20 percent of your home yourself. In addition, the affordability rule states that the running costs of your home should not exceed 1/3 of your gross household income. These costs include the mortgage interest, any amortisation payments and annual maintenance and ancillary costs.

Check the possible sources of equity financing:

The 20 percent that you must contribute in equity capital can come from various sources, such as the second and/or third pillar. However, obtaining such funds is regulated by rules and conditions that must be clarified in advance with the relevant institutions. In addition, ten percent of the equity capital must be provided as “hard” equity capital, i.e. mostly in the form of cash assets. The inclusion of private loans is also possible, but depends on various factors such as the date of repayment. You should keep such possibilities in mind and discuss them with the mortgage provider.

Choose the right strategy:

Do you want to make a short-term or long-term commitment, or are you more inclined towards a long-term fixed-rate mortgage or flexible financing solutions such as the SARON mortgage? Do you value security or should your home be as cheap as possible? Of course, mixed forms (e.g. 50% fixed-rate mortgage and 50% SARON) can also be concluded. You should ask yourself questions like these and clarify them with your financial advisor. The answers depend very much on your individual situation and life situation, which is why it is important to deal with these issues in advance. Especially in the current volatile interest rate environment, the strategy must be well thought out, as each strategy has its advantages and disadvantages. If you would like to learn more about the different strategies, click here.

Choose the right provider:

Whether pension funds, insurance companies or traditional banks: the choice of mortgage providers is large and diverse. There are also many online mortgage providers available nowadays that offer you the closing of the mortgage at the click on a button and without a personal consultation. It is therefore not surprising that choosing the right provider is also becoming an agony of choice for many home buyers. It is important that you compare the providers, because what applies to one lender (e.g. flexibility regarding the affordability calculation) does not necessarily apply to another lender. The advantage for you, however, is that you can benefit from independent mortgage advisors like HYPOHAUS. Free of charge and without obligation, we will analyse your individual situation together and find the right lender for you. Would you like a no-obligation consultation? Then click here.

Compare offers:

Your main bank of many years does not necessarily have the best offer ready for you, which is why you should obtain various offers from different lenders – and not immediately sign up for the first offer that comes along. In some cases, the offers differ by several thousand francs per year, and many financial institutions are also willing to negotiate and approve discounts for customers with low loan-to-value ratios and affordability.

Think ahead:

Buying or building a property comes with many obligations that affect not only you alone, but also your close family. To protect your loved ones, you should consider potential risks such as divorce, death, etc. in advance. You also need to think about your future retirement, as your income will usually decrease and the affordability calculation may no longer work out. In general, the loan-to-value ratio should be reduced towards retirement. Such eventualities must be discussed and clarified with the mortgage provider or your contact person before taking out a mortgage.

With these tips and tricks, you should be well equipped for the negotiations. Do you have any further questions or comments? Of course we will support you in finding the right mortgage, feel free to contact us!

Volatile interest rate markets, which mortgage should I get?

The current volatile interest rate environment confronts many people with a difficult decision: Is it better at the moment to take out a cheaper SARON mortgage or perhaps to play it safe and make a long-term commitment by opting for a fixed-rate mortgage? Or maybe it would be better to take out a hybrid mortgage? Each mortgage model has its advantages and disadvantages, but one thing is certain: the choice of the right strategy depends entirely on individual preferences and personal circumstances.

Strategy 1: 100% in SARON

The SARON mortgage enjoys great popularity, especially in times of volatile interest rates, as it is historically more attractive than fixed-rate mortgages. It is particularly suitable for people who do not want to make a long-term commitment and attach great importance to flexibility. However, it must be said that interest rate fluctuations can indeed occur and clients who opt for a SARON mortgage must be able to bear them. This is of especially the case if a 100% SARON strategy is chosen. It is therefore recommended that a budget is drawn up with an imputed buffer, for example at interest rates between 2.50% – 3.00%. Last but not least, this flexible type of financing is primarily suitable for people who actively follow what is happening on the money and capital markets and thus do not want to miss the opportunity to switch part or all of their mortgage to a fixed-rate mortgage. If the affordability is tight (> 33.00%), you should think carefully about taking out part of your mortgage in the form of a fixed-rate mortgage so that the costs of owning your own home do not go through the roof when interest rates rise sharply.

Strategy 2: 100% in a fixed-rate mortgage

Fixed-rate mortgages also have certain advantages. One of the most important factors why many clients opt for a fixed-rate mortgage is the planning security factor. Only with a fixed-rate mortgage is it possible to establish a clear budget for the interest burden in the coming years. Accordingly, this type of financing is particularly suitable for people who do not want to be surprised by interest rate fluctuations and would rather be on the safe side. People with a fixed-rate mortgage do not have to fear rising interest rates during the term of the contract, as only the fixed interest rate has to be paid during the term of the contract.

However, fixed-rate mortgages are only suitable to a limited extent for people who cannot estimate the long-term nature of their home purchase. If, for example, emigration plans or job rotations abroad are possible scenarios, then in the case of an early termination of the fixed-rate mortgage, sometimes high costs have to be paid due to the early repayment penalty. However, it is important to know that paying the early repayment penalty is only one of three possible options for ending the fixed-rate mortgage early:

Option 1: Transfer the fixed-rate mortgage (for the remaining term) to a new home in Switzerland.

Option 2: Transfer of the fixed-rate mortgage to the new buyer

Option 3: Early termination and payment of any early repayment penalty

Strategy 3: Mix of 50% SARON and 50% fixed-rate mortgage

In the current market environment, many clients find it difficult to decide whether to opt for a 100% fixed-rate mortgage or a 100% Saron mortgage. In such a case, it is worth considering splitting the mortgage into different tranches and taking out a hybrid of the two. The decision to take out part of the mortgage volume in a SARON mortgage and the other part in a fixed-rate mortgage again has several advantages. For example, splitting the mortgage prevents the entire mortgage from having to be extended during a period of high interest rates. In addition, you can deal more flexibly with changing life situations. Partial repayments of the mortgage are also easier, as you can benefit from the conditions of the different mortgage forms. Last but not least, a mixed form of mortgage can help to balance out the constantly changing interest rate environment and the fluctuations that come with it.

In conclusion, no matter which mortgage model you choose, it is important to find out about its advantages and disadvantages. It is also very important to compare different providers. Let us analyse your risk tolerance and security needs together so that you can finally conclude the mortgage that is right for you.

What is my personal mortgage profile?
Find out your personal mortgage type now by answering 9 targeted questions. Fill in the HYPOHAUS mortgage profile and find out more about the right strategies for your mortgage financing. Click here to do so.

The SARON mortgage is currently a very popular form of mortgage financing. But what do you have to look out for when taking out a SARON mortgage? Do all lenders offer the same conditions for the SARON mortgage? We would be happy to tell you!

What is a SARON mortgage?

The SARON mortgage is a money market mortgage with a varying interest rate. It is therefore suitable for clients who wish to benefit from generally favourable money market interest rates and accept certain fluctuations in the interest rate. SARON stands for Swiss Average Ratio Overnight Mortgage (SARON for short) and is an interbank interest rate at which the Swiss National Bank and Swiss banks lend money to each other. The customer interest rate of a SARON mortgage is made up of the SARON interest rate and the customer margin fixed in advance. The interest period is usually three months, with the amount of the interest payment to be made being fixed on the second-last day of the interest period. The SARON mortgage is particularly suitable for people who want unlimited and flexible financing and can cope with short-term fluctuations in interest rates. Last but not least, the noticeable rise in interest rates on fixed-rate mortgages in recent months has led homeowners to increasingly switch to money market mortgages, as these have so far been spared from the rise in interest rates. It is therefore worth keeping an eye on interest rate levels and comparing lenders.

Are there differences in SARON mortgages?

Yes, there are significant differences in SARON mortgages depending on the lender. In particular, you should look out for the following important points when comparing SARON mortgages:

Is there a framework term?

Do I have a customer interest margin guaranteed during the term?

What are the exit conditions and is there a notice period?

Under what conditions may I switch to a fixed-rate mortgage?

SARON mortgages are subject to a framework term of three to five years with most lenders. For customers, this means that the fixed customer margin does not change during the term. For example, you currently (as of 29 November 2022) pay SARON 0.43% plus 0.55% customer margin = 0.98% customer interest. A fixed client margin means that the lender may not make any adjustment to the 0.55% premium to the prevailing SARON level during the framework term of the contract. This margin security can be important in times of rising SARON key interest rates. There are already some banks that have increased the customer margin in the SARON. This is often justified on the part of the capital providers by higher risk costs, but actually only means that the margin for the capital providers is decreasing and they therefore want to demand this increase in costs on the part of the customer.

In principle, it is possible to change to a fixed-rate mortgage in SARON at the end of each 3-month period. The change of the mortgage model is therefore flexible, but you are bound to the lender. If, on the other hand, you wish to terminate the SARON mortgage early and change providers, you can usually only do so by paying the so-called early repayment penalty.

However, there are also lenders who do not offer a fixed or only a 1-year framework term in the SARON offer. As a customer, you benefit from a very high degree of flexibility and can therefore amortise the mortgage or change the lender every year. On the other hand, such high flexibility also entails certain risks for you as a client. The lender is able to adjust the fixed customer margin upwards at any time at the end of the term. There is therefore no certainty that you will pay a fixed margin premium for 3 or 5 years.

Is it possible to mix mortgage products?

Yes, a split between fixed-rate mortgages and SARON mortgages is possible. Especially in times of uncertain developments on the interest rate market, it can be an exciting strategy to split different tranches into fixed-rate mortgages and SARON mortgages. In this way, you have somewhat hedged the risk of interest rate fluctuations and can still benefit from a more attractive average interest rate across all tranches. We would be happy to show you a tailor-made solution for you and give you advice.

Would you like to learn more about the SARON mortgage and find out if it is the right mortgage model for you? Get in touch with our team of experts, we will be happy to help you find the right financing solution!

Have you ever wondered what mortgage splitting is exactly and what advantages and disadvantages it entails? We would be happy to clarify the matter for you.

Mortgage splitting refers to the division of a mortgage into several tranches with different terms. The number of tranches depends on the total amount of the mortgage. As a rule, the higher the total amount of the mortgage, the more tranches are possible. An average interest rate is paid in each case, which is calculated from the weighted interest of each tranche. The division into several tranches can make sense in individual cases, but some aspects must be taken into account.

What are the advantages of mortgage splitting?

Splitting prevents the entire mortgage from having to be extended at once during a period of high interest rates. It can therefore make sense to take out several tranches in order to avoid precisely this interest rate risk. This allows you to deal flexibly with ever-changing interest rates and life situations. In addition, mortgage splitting gives you greater flexibility to be able to repay parts of the mortgage more easily. Finally, with a splitting, the type of mortgage can also vary. For example, you can take out one tranche in a flexible SARON mortgage and the other tranche in a fixed-rate mortgage.

What are the disadvantages of mortgage splitting?

However, mortgage splitting also has disadvantages. Since all tranches are usually taken out with the same financial institution, dependency can arise. This in turn can make it difficult to transfer and switch individual tranches to another lender, as each financing institution wants to own the mortgage notes / security over real property as exclusively as possible. If the maturities of the tranches are more than two years apart, the change of provider is only possible to a limited extent. Moreover, early termination of the mortgage is associated with costs, the so-called early repayment penalty, which is hardly worthwhile on balance.

Finally, it can be said that whether and how you should divide your mortgage into tranches always depends on your individual situation. Let us, your independent company, advise you on all aspects of home ownership.

Your HYPOHAUS team

The affordability of your mortgage is currently given. But how will this look in retirement?

The affordability of your mortgage changes as you get older. Especially when you reach retirement age, your income is replaced by the AHV and pension fund pensions or capital withdrawals. Often, your income decreases considerably at retirement age. But nevertheless, even in retirement, calculative housing costs may not exceed one third of your income. The imputed interest is 4.5 to 5%, depending on the lender, plus about 1% of the property value for maintenance costs.

The income therefore decreases, but the imputed costs remain constantly high. How is this supposed to work?

Most banks and insurance companies therefore ask their clients to repay their mortgage to a loan-to-value ratio of 65% by the time they reach retirement age. This means that the mortgage may only amount to a maximum of two-thirds of the market value of the property. However, if the affordability in old age is not given at a 65% loan-to-value ratio, the loan-to-value ratio must even be lower than 65% in this situation.

Our tips for mortgages in old age:

Early planning

For the reasons mentioned above, we recommend that you plan early for your financial situation in old age. In this way, future income from AHV and pension funds can be calculated and compared with the expenses and imputed costs of the mortgage. With early pension planning, the amortisation payments can be adjusted up to retirement age so that affordability in old age is not a problem and the costs in old age can be kept as low as possible.

Careful selection of maturities in old age

When extending mortgages in old age, it is definitely worth choosing the terms carefully. Planning in old age is becoming increasingly difficult. How long will you live in your own house? Will you leave the property to your children or rather sell it? In principle, it is advisable not to commit to mortgage terms for too long in old age. However, if the property is signed over within the family, then transferring the mortgages to the new owner can also be quite interesting. If such a scenario is realistic, then in principle there is nothing to be said against a longer mortgage term.

Compare providers – banks look at affordability in old age differently

Not every bank applies the same rules when assessing affordability in old age. For example, the rates for imputed costs vary from provider to provider, as does the maximum housing costs: many banks allow a maximum of 1/3 of income, while others are more accommodating and calculate 35 to 40%.

If you want to know more about this topic or if you even need more advice in this matter, contact HYPOHAUS today so that we can analyse your personal situation together. From over 50 providers, we will find the one that suits you best and offers you the best mortgage extension quote.