Frequently Asked Questions
Strike answers all your questions about financing, property acquisition, and our services.
1Is it possible to buy a property with less than 20% equity?
Yes, depending on the financial capacity it is possible to bring in less than 20% of equity. A contribution of only 10% may be sufficient if the buyer provides additional collateral to the lending institution such as pension fund assets, 3rd pillar A assets, or surrender values from life insurance policies. However, the 10% equity capital must not come from the 2nd pillar.
2Am I obliged to withdraw my 2nd pillar (pension fund) to buy a property?
If your financial capacity allows it, it is possible to pledge your pension fund. In this case, you do not have to withdraw it and do not have to pay tax on the capital. This solution also allows you to keep your pension capital and risk coverage intact.
3Is it possible to find financing if my charges exceed 33% of my income?
Yes, it is possible to find financing if your expenses exceed 33% of your income. For the same financial situation, not all institutions take the same parameters into account when calculating the granting of a loan. This can have a significant impact on the cost/income ratio. As each situation is unique, we recommend that you seek an expert’s advice to help you make the right decision.
4Should the interest rate be the main factor when choosing my mortgage?
The interest rate of the mortgage is often considered the most important parameter in the choice of mortgage and financial institution, but it is far from being the only one. Some institutions will be able to lend you more than others, some will allow you to amortize a smaller part of the mortgage, others will not penalize you if you terminate early (in case of a resale for example). The lowest rate is therefore not always the best deal and you should consider your options carefully before making a decision that will bind you for many years to come.
5What is a mortgage composed of?
When buying a property, the buyer must provide equity of at least 20% of the market value of the property. A mortgage financing consists of two ranks: The first rank can only be granted up to two thirds of the value of the property or 66.6%. The second rank corresponds to the part of the mortgage exceeding two thirds of the value of the property. This part is considered by the financial institutions to be the riskier part of the mortgage, so it is the one that must be repaid first.
6How is the mortgage amortization calculated?
When purchasing a principal residence, the mortgage must be reduced to two-thirds of the value retained by the financial institution within a maximum of 15 years (and at the latest by the legal retirement age). Let us take an example: in the case of a property worth CHF 1,000,000, financed with a mortgage of CHF 800,000, the 1st rank mortgage would be CHF 660,000 (1,000,000 x 66%), the 2nd rank mortgage would be CHF 140,000 (800,000 - 660,000). Assuming an amortisation period of 15 years, this gives an annual amortisation of approximately CHF 9,333 (140,000 / 15).
7What is the difference between direct and indirect amortization and what is the impact on my taxation?
With direct amortization, you pay off a portion of your mortgage periodically, at an amount defined in your contract. This gradually reduces the interest you pay. With indirect amortization, you pay this same amount, but into a 3rd pillar. The lender will take your 3rd pillar (bank or insurance) as collateral since the funds are to be used to repay the loan in fine. This solution allows you to increase your pension capital, benefit from tax advantages and – if you choose a 3rd pillar insurance – allow you to benefit from additional risk coverage.
8What are "notary fees"?
The notary's fee generally refers to the costs of purchasing a property that must be covered by the buyer. Contrary to the name, most of this variable amount (between 3% and 5% of the purchase price depending on the canton) is not entirely for the notary. It is actually used to cover registration fees (taxes), the entry in the land register, various expenses and the notary's fee.
9Why do financial institutions use a much higher rate than the actual rate for calculating expenses?
Financial institutions use a higher rate than in reality in order to guarantee a sustainable financial capacity even in case of a strong increase in market rates. The imputed interest rate used by the financial institutions correspond to a high historical average, varying between 4.5% and 5.5% depending on the financial institution. However, the actual mortgage rate is much lower.
Do you have any further questions or would you like to get advice from a financial expert?