At some point, everyone wants to own their own home. However, not everyone has a lot of cash lying around that they can use to purchase their home. Most aspiring homeowners have to first work out what they can afford and then figure out funding options.
Cosmos Values gives you some expert advice on how to find the right financing for your new home.
There are two factors to take into consideration when figuring out your budget.
- Can you afford the running costs of the new property?
- Can you meet the overall costs of acquiring the property?
Overall Costs of Acquisition
These include the cost of purchasing your home as well as the transaction costs applying in the canton the property is located in. These are costs such as:
- Notary fees
- Fees for ensuring the organization of rights
- Property transaction fees
- Property taxes
Swiss banks will finance 80% of the acquisition costs. The homeowner must come up with the remaining 20%. It is possible to raise this capital from sources such as:
- Savings and valuables that you can sell
- Pledge of securities
- Sale of securities
- An Advance on an inheritance
- Interest-free loans from friends and family
- Endowment by parents
Calculating the Buyer’s Affordability
In order for your budget to have any merit, it must include Switzerland’s interest rate of development as well as your income situation both current and in the future. Your income may change due to factors such as the birth of a child. Swiss banks factor this possibility in when calculating whether a buyer will be able to afford the property in the long run. The financial obligations for the home should go above a third of the buyer’s gross income.
Included in the affordability calculation are payments for loans and/or mortgages. Other costs included include:
- Maintenance and running costs
- Renovations and repairs
Additionally, potential interest rates on loans and mortgages are taken into account. Mortgage interest rates are averaged at 5% by most Swiss banks.
To cut down on debt, buyers are encouraged to consider amortization. If you buy a property that is in great conditions, you should be able to put aside at least 1% of the borrowing requirements per year and include this in the calculation.
Get Credit Approval
Once you find a home you like, get your credit approved before putting pen to paper. The following documents are needed when applying for a loan in Switzerland:
- Your current tax returns
- Salary statement
- Record of debt collection
- Information concerning the property you plan to purchase
- Sales contract draft
- Extract from the land register
- Estimate of cantonal building insurance
The information on the property will include the floor plan sales documents.
Why Credit Approval is Important
Credit approval gives you access to offers which you should collect and then negotiate with the banks. You must not accept the first offer that comes your way. It is advisable to collect alternative competing offers that you can use to negotiate. You may hire a financial advisor to help you with this.
Also important is drawing out a fatality risk insurance. This will ensure that in the event of your death, your family will not lose the property.
Compare the Mortgage Models
Switzerland has four different types of Mortgages. These are:
- Libor ( London Interbank Offered Rate)
- Special Mortgage
Variable: It has no fixed term. The Interest rate is constantly adjusted to suit the capital market development.
Fixed-rate: This mortgage runs for 1-15 years. Its interest rate remains fixed for its entire term. A longer-term attracts a higher interest rate.
Libor: This is variable and Fixed-rate mortgages combined. It offers a fixed term and variable interest which is adjusted to Libor monthly, quarterly or bi-annually.
Special mortgage: This may be a combination of the variable and Libor plus fixed-rate mortgages, or a mortgage with an interest bonus for eco-friendly homes or for first-time buyers.
As long as you qualify for financing, owning your dream home in Switzerland is only a few signatures away. However, you must ensure that you have all the information need so that you do not end up with a problem on your hands.