What if you could save tens (or even hundreds!) of thousands of Swiss francs by asking this question?
It’s always the same story.
During a drink with friends on a Saturday evening, or a Sunday lunch with family, you hear:
“We’ve decided we want to buy a property! Now, we’re on the search for our dream house/apartment in Switzerland :D”
And then, naturally (for a personal finance geek), you ask the question:
What’s your budget? If I see something in your area, I’ll let you know.
When your bank dictates your real estate purchasing power…
I’ve got a couple of friends, Laura and Guillaume. They’re in their late twenties and don’t yet have children.
And every time, I hear the same response as them, after they’d been to see the bank:
“It’s great, with our 2nd pillars as security, and by taking Guillaume’s 3rd pillar, as he’s been paying in for longer than me, we can get a mortgage for 950'000 Swiss francs!!”
And Guillaume continued: “But that’s the absolute maximum. The banker told us that for more than that, he’d have to ask his manager for an exception. Otherwise, we’d have to empty one of our second pillars, but we don’t want to touch them.” 1
So, then I asked them: “But what do you actually need in terms of space? Have you found properties that are suitable for you on Homegate (or Anibis or Comparis)?”
The feedback is always surprising…
Because although they’ve had a brief look at property listings, above all, they were waiting to see what the bank would lend them.
And it’s a bit like an open bar.
They’re only planning to have one child, yet they want 3-4 bedrooms so they can have friends to stay, make a nice big office for Laura, and a small cinema room with a projector for him, etc.
Or maybe only 3 bedrooms, but in a house in the country!
Subtly, so as not to preach, I mentioned to Guillaume: “The problem with that is that you’re letting the bank and their mortgage offer dictate your lifestyle… personally, I like to be in control of my own destiny as you know… especially when it can save me tens of thousands of CHF!”
THE question to ask yourself
Guillaume thought about our chat for the rest of the weekend.
The Tuesday after our drinks, he sent me a WhatsApp message:
I explained my advice to him regarding mortgages and the subject of a real estate purchase in Switzerland:
“Before you go to see your banker, I recommend you ask yourself this question before buying a house in Switzerland (or an apartment, it doesn’t matter):
What do I really need? A 6.5-room house with a garden that’s too big to maintain? 3 bathrooms, really?
“Your needs will be different to mine…”
”…depending on your family situation (children you’re planning or already have) as well as your job (need for a home office)."
“But as usual, being frugal when defining your search criteria for your dream home can be very beneficial.”
And I wasn’t talking to him in terms of (hundreds of thousands of) Swiss francs… but regarding being able to achieve financial independence in Switzerland several years earlier!
My own story
I gave him our example of a Mustachian journey to owning real estate in Switzerland.
In our case, we always knew what we needed, and we looked for a 4.5-room property because we already had our two children when we were looking to buy.
We never even mentioned a 5.5-room because the prices on Homegate were already so expensive that it would have taken us 5-8 years before being able to buy…
Once we’d done our analysis, we went to see our banker to find out what we could afford to pay.
And not the reverse.
Buy house Switzerland: Conclusion
Guillaume and Laura are pretty well aligned when it comes to their FIRE objective. They have plans to alternate between living in Switzerland and Japan. Six months in each country… the dream!
Therefore, Guillaume didn’t need to convince Laura when he changed the filter for their Homegate search alert from a maximum of 5.5 rooms to a… 3.5! Their child’s bedroom can make do as a guest bedroom for the few occasions that people come to stay!
What about their home office? Laura found a way to arrange their bedroom via Insta which she loves!
And for those of you reading this, the rule for buying in Switzerland is simple:
- Define your needs and create search alert
- And only after this, then go and talk to your bank
- That way, rather than buying a palace, which will quickly enslave you (in both time and costs), it’s better to buy frugally so that you can keep the maximum amount of CHF for your freedom!
FAQ for future property owners in Switzerland
Buying an apartment in Switzerland is often the purchase of a lifetime for most people.
So banks and other financial institutions are careful not to provide you with useful and objective data…
Is it better to buy or rent in Switzerland?
Ouch, that’s the big question :)
And the worst answer… it depends…
I was so fed up with hearing this, that I spent time answering this common question once and for all in this article.
Tell me, Marc, do you have a guide to becoming a property owner in Switzerland?
Of course!
I documented our entire journey to purchasing real estate in Switzerland, from the initial research to signing the contract at our notary’s (and the payment… of the notary’s fees, of course ^^).
You can find all this via this link: “How to buy my first home in Switzerland - guide”.
Should I take out a mortgage from an insurance company to buy a property?
Well, you can tell you’re new to the blog :)
You’ll come to realize that for a mortgage (for real estate in Switzerland anyway), you should NEVER take out a mortgage from an insurance company.
Why? Because they’ll lure you in with a low rate, and along with that, you’ll have to take out a 3a pillar linked to life insurance. And that is the worst financial mistake you can make.
Believe me, based on my experience, I made that mistake… twice! And I wasted several tens of thousands of Swiss francs in doing so…
I recommend you read these two articles if you want to find out more:
- Close your pillar 3a life insurance without further delay!
- Termination mixed pillar 3a (and early termination fixed mortgage 10 years!)
Do you have any recommendations for taking out a mortgage?
I’ve got an article coming up about this, which follows on from this one.
As a brief summary/teaser: have a look at the mortgage offering from VIAC.
Do you have any tips for finding the perfect property?
I’ve described how we found our own home in this blog post.
But there’s also another way.
It’s not for everyone because it requires significantly more effort than just checking search results.
Since I first got into real estate investment in Switzerland, I’ve had access to loads of great deals well before they’re even on the market. These have come from a network of contacts that I’ve created over the years.
If you’re not yet ready to get into rental real estate investment, you can still replicate my technique by getting in touch with all the developers and construction general contractors directly.
Tell them that you’re looking for a property with certain criteria.
You might be surprised to find out that they are receptive to this.
Because in the end, you’ll always have one sale less that they have to pay their real estate agent for!
The other situation relates to my friends who are in their mid-thirties. They already own a property that they bought 10 years ago for around CHF 650'000, and which is now worth CHF 950'000! And they’re thinking about selling it in order to take out a bigger mortgage to buy a crazy property that’s much more than they really need for their day-to-day living… ↩︎
