How to finance your dream home?
A real-estate project is often the dream of a lifetime. Only 34% of the Swiss population are homeowners, and for good reason: housing prices are quite high and certain conditions regulate access to property ownership. However, realising this dream is possible by selecting both suitable financing and guidance from financial professionals. The process of financing a property requires much more than just a simple financial approach; it is a strategic step that determines the success of your overall project. Learn how to become the owner of your dream property while ensuring your long-term financial stability.
Drawing up a budget depending on your situation
Assessing a budget based on your situation is the first step of all. You need to prepare an overview of your income, current expenses, and current financial commitments. In parallel, calculate all the expected costs relating to the property purchase: the purchase price, taxes, and other fees.
This preliminary step enables you to determine the sum you can allocate to financing your property.
In the Swiss real-estate market, the question of your downpayment is of paramount importance when acquiring a property. To realise your status as a homeowner, it is imperative to provide a downpayment of at least 20% of the total purchase price of your future home.
This contribution is broken down as follows:
- 10% must come from your liquid assets, such as savings, life insurance or the 3rd pillar
- The remaining 10% can come either from your liquid assets, or from your 2nd pillar (LPP)
This specific provision of the Swiss rea-estate market highlights the importance of financial preparation and the necessity of having the adequate resources to become a homeowner.
Calculating your borrowing capacity is a decisive element in planning your property financing. Each financial institution uses its own calculation method with a defined percentage. It is important to base this on the institution's theoretical costs rather than actual expenses; hence, the borrowing capacity should not exceed one-third of the income-to-expense ratio. The minimum equity must include 10% from personal savings as well as provision for the notary fees.
Save on equity investment
Mobilising 20% of the purchase price through your own means is therefore an essential condition for obtaining a mortgage loan from the bank. Your capital contribution can encompass a variety of resources, such as liquid assets, securities, advances on inheritance or received donations, interest-free and non-amortised loans from relatives, pension fund assets (respecting the rule of a maximum of 10% from this source), etc.
Implementing rigorous financial strategies is a wise option. You might consider opening a savings account dedicated exclusively to your real estate project and automating regular fund transfers.
Analysing your expenses can help you redefine your budget to save more. By relying on careful financial management and saving measures, you can gradually build up the necessary funds to obtain a mortgage loan.
Mortgage loans
Whether you aspire to own a comfortable home, realise a lucrative real-estate investment, or a combination of both, you will probably need to borrow.
The mortgage loan, widely favoured in Switzerland, is one of the primary methods of financing property acquisition. This option involves using the real-estate as collateral for the loan. By pledging the property to the lending institution, borrowers benefit from advantages such as favourable interest rates and substantial loan amounts.
Several criteria influence your eligibility for real estate financing. Your income is the most important factor. Annual charges, including interest calculated at a theoretical rate of 5%, amortisations, and maintenance costs, should not exceed one-third of your gross annual income.
The value of the property you wish to acquire is an essential parameter. This collateral value defines the upper limit of the loan amount.
Check opportunities for cantonal grants
Potential financial support can be offered at the cantonal level for the financing of a property. Some regions provide grants, tax credits, or specific programs to assist with real-estate acquisition. These initiatives aim to stimulate the local real-estate market while offering residents opportunities to become homeowners more easily.
Each canton may have its own criteria: enquire with the relevant authorities in your canton or consult online resources to learn about the subsidies and benefits available in your area. For example, in the canton of Geneva, you can find various financial aids to facilitate the purchase of a home.:
Obtain help to become a homeowner | ge.ch
Benefit from the expertise of a financial advisor
When pursuing the financing of a property, consulting a financial advisor or a mortgage expert can be invaluable.
The private bank Piguet Galland supports you in this project of a lifetime. We bring our experience and knowledge of real-estate financial mechanisms to your service. Our advisors identify the solution that best suits your financial profile and goals. They guide you through the specific advantages of each type of mortgage loan.
We take your personal situation, borrowing capacity, and ambitions into account and assist you in preparing an appropriate financial plan.
By following these steps, you can see how to finance the property you desire.
For all your questions, reach out to your bank, Piguet Galland.