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Unmarried couples can also buy a property together. However, couples should protect themselves in the process. In this blog post, we explain what you should bear in mind when buying property as a couple.

Marriage is not a prerequisite for buying a property. In contrast to marriage, however, cohabitation does not provide coverage for unforeseen life events such as death or separation. These risks must be covered, especially when buying property. Basically, there are three possible forms of ownership available to the couple.can choose between sole ownership, joint ownership and co-ownership. It is advisable to draw up a cohabitation agreement as a basis for all three forms of ownership.

Sole ownership

In the case of sole ownership, the property is acquired by only one buyer. This person is entered in the land register as the sole owner and is solely liable for the mortgage debt. The second cohabiting partner has no legal interest in the property, but can agree a rental and maintenance obligation with the owner under a tenancy agreement. Sole ownership is recommended if only one partner has the financial means for the purchase. However, in the case of sole ownership, the uninvolved cohabiting partner is not covered at all for the risks of death and separation. A tenancy agreement, however, would specify his or her tenancy rights, the rent and the terms of termination.

Joint ownership

In joint ownership, the property is purchased by both partners. This means that both parties are registered as owners in the land register without specifying who owns which parts of the property. The basis for the purchase in joint ownership is the formation of a simple partnership consisting of the two partners. Only in this way is joint ownership valid under Swiss law. The partnership is also registered in the land register. Both owners can fully dispose of the property, which at the same time means that all decisions must always be made unanimously. In the case of joint ownership, one party can therefore block all decisions. The two owners are also jointly and severally responsible for the property. Another problem is that with this form of ownership it is not possible to make advance withdrawals of pension assets.

Co-ownership

The last of the three possibilities is the acquisition of a property in co-ownership. Here too, both cohabiting partners own the property. In contrast to joint ownership, however, the land register indicates individually who owns the property and in which shares. Likewise, each owner can freely dispose of his or her share. The ownership shares are entered in the land register in fractional form. In most cases, ownership is determined according to the financial resources contributed, e.g. 1/3 and 2/3 co-ownership. The obligations towards the property are normally also distributed according to these quotas, as is the case with maintenance costs. In principle, the two owners can freely dispose of their shares. However, this is difficult in the case of a sale. If one party wants to sell his or her shares, it is usually difficult to find a buyer for a co-ownership. In addition, the other co-owner has a legal right of first refusal: if one wants to, one can become the sole owner of the property before another buyer is brought on board. Here, too, both owners are jointly and severally responsible. In contrast to joint ownership, in the case of co-ownership pension funds can be withdrawn in advance for the purchase of the property. The majority of experts recommend the form of co-ownership for a property purchase in a cohabiting couple.

Additional recommendation: cohabitation agreement

Regardless of which form of ownership you prefer, it is always advisable to sign a cohabitation agreement. This creates clear conditions and rules. Such a contract can be drawn up in writing and signed by the partners. Among other things, the following points can be stipulated in it:

• Who will own the house or flat
• Which form of ownership is chosen
• Who will contribute how much of their own funds to the purchase
• How the maintenance costs will be distributed
• How decisions will be made
• What is to happen in the event of separation or death
• How to set a deadline for moving out in the event of separation, selling the property or taking over the property

If you are currently interested in home ownership financing, you have certainly already come across the terms direct and indirect amortisation. But what do these terms mean and what is the difference between the two types of amortisation?

The amortisation of the mortgage loan is about the repayment of the loan taken out. Banks distinguish between direct and indirect repayment (amortisation).

When you get a mortgage from a bank, insurance company or pension fund, you as the buyer of a property usually put up at least 20% of the purchase price as equity. The loan granted by the bank is divided into two parts of the mortgage. You will receive two-thirds or about 65% percent of the purchase price from the bank as a 1st mortgage. If you need more financing, the bank will grant you a 2nd mortgage. In contrast to the 1st mortgage, the bank requires you to repay this 2nd mortgage within a time frame of 15 years or until ordinary retirement age.

There are two possible ways for you to repay the second mortgage: directly or indirectly.

Direct Amortisation

The first option is direct amortisation. In this case, you directly reduce your mortgage debt of the second mortgage year by year. The amount of the annual amortisation is deducted directly from your mortgage debt. The advantage of direct amortisation is that the debt on your property is reduced each year and you pay less mortgage interest year after year.

Indirect Amortisation

With indirect amortisation, you pay an annual amortisation amount into a retirement savings account (pillar 3a) or into a retirement savings policy, which serves your bank as security for the mortgages granted. In contrast to direct amortisation, the amount owed to the bank does not change but remains constant. The debt is not continuously reduced, but only after the fifteen-year term has expired. At that point, the assets saved in the retirement savings account 3a are used to repay the mortgage debt. With indirect amortisation, you benefit from a double tax deduction. On the one hand, you can deduct the constant mortgage interest from your taxable income; on the other hand, you can also deduct the amount you pay into the pillar 3a for tax purposes.

Here we summarise the advantages and disadvantages of each option in a short list, so you can compare the advantages and disadvantages of direct and indirect amortisation and thus of lower mortgage interest or a higher tax deduction:

Advantages and disadvantages of direct amortisation:

Advantages:

• Your mortgage debt becomes smaller each year
• The interest costs for your property decrease continuously
• Your disposable income becomes larger

Disadvantages:

• Your tax deduction will be lower because the mortgage debt and the interest will decrease.
• If you want to pay into pillar 3a, you will need an additional budget for this.

Advantages and disadvantages of indirect amortisation:

Advantages:

• You can deduct the entire mortgage debt from your taxable assets until it is repaid.
• You can deduct the constantly high mortgage interest from your taxable income until repayment.
• You can deduct the maximum amount paid into the 3rd pillar from your taxable income at the same time

Disadvantages:

• Your mortgage debt does not reduce
• Your interest burden is not reduced

Which form of amortisation is right for you depends very much on your personal and financial situation. You also need to consider the tax advantages and disadvantages. The amortisation of the mortgage should be thought through in the long term and adapted to your personal needs. We therefore warmly recommend you consult an expert in that matter. Our team will be happy to help you with your needs and questions.