Your path to owning your own home

If you will be living in the property yourself, you may make an early withdrawal from your pension fund or pillar 3a assets. Otherwise early withdrawals are not permitted. You can use your pension fund to finance up to 10% of the property's value, i.e., half of the own funds required. You can also use your pillar 3a assets.

Affordability refers to the relationship between your income and the costs you will incur for your property. As a rule of thumb for calculating affordability, the monthly costs for your own home should not exceed 33% of your gross income. This includes interest costs, amortization payments, maintenance costs and incidental expenses.

The loan-to-value ratio refers to the proportion of the property you finance yourself and how much you borrow by means of the mortgage. The following rule applies: You must be able to finance at least 20% of the property's value yourself through own funds.

Amortization means repaying part of the mortgage regularly and within a predefined period of time. There are two ways to do this: direct and indirect amortization.

With direct amortization, the debt is regularly reduced by a fixed amount (usually quarterly). This reduces both the total debt and the interest you have to pay regularly. However, since mortgage interest can be deducted from taxes, the tax burden increases over time if you choose direct amortization.

In the case of indirect amortization, the debt remains in place. For example, you pay the amortization amount into pillar 3a, which is pledged to the bank as collateral. The capital is paid out upon retirement at the latest and this amount is then used to amortize the mortgage.

In addition to the purchase price, there are other costs that you should consider when buying a property.

A change of ownership usually involves costs of approx. 1-2% of the purchase price. This includes notary fees for notarizing the contract of sale and the entry in the land register, which is also subject to a fee.

If you make an early withdrawal of assets from your pension fund or third pillar to buy a property, this is considered a lump-sum payout, for which tax is also due – usually approx. 1-2% of the withdrawal amount.

The ongoing costs of a property of course include the interest costs and the amortization payments. You should also factor in maintenance costs and incidental expenses. As a rule of thumb, 1% of the purchase price should be set aside each year. Finally, you should also think about making provision for renovations, for example.

By the way, with a UBS mortgage you benefit from our free budget planner for property costs, Immo-Smart.