What is a mortgage? Key facts at a glance.
A mortgage is a loan for the purchase of real estate. The mortgage interest is the price of the mortgage. As a guarantee, the mortgage lender receives a mortgage note on the real estate. In our article, you will find out how to take out a mortgage and what to consider.
Mortgage – the road to homeownership
Purchasing real estate is usually a large purchase. Only a few people are able to come up with the entire purchase amount from their own resources. It is therefore more common to take out a loan from the bank – a mortgage. However, a mortgage cannot finance the entire purchase price. Buyers must put up at least 20% of the real estate value themselves.
Financial requirements for a mortgage
Anyone wishing to take out a mortgage must be able to cover at least 20% of the purchase price of the real estate from their own equity capital. At least 10% of this must be "hard" equity capital. This includes: Account balances and savings, securities, Pillar 3a pension capital, gifts, and inheritances. The remainder may be "soft" equity capital. These include, for example, withdrawals or pledges of pension fund assets.
When granting a mortgage, the mortgage lender first checks the affordability of the mortgage. This is because in order to be able to take out a mortgage, the total running costs of the real estate must not exceed one-third of the potential buyer's gross annual income. The total running costs include:
- Mortgage interest (as the interest rate level can change, 5% is used for calculation purposes)
- Real estate ancillary costs (approximately 1% of the purchase price per year)
- Possibly the annual repayment costs for the repayment of the second mortgage.
What are the costs of a mortgage?
Here, we must first distinguish between first and second mortgage.
First mortgage: Granted for a maximum of 2/3 of the market value of the real estate.
Second mortgage: If more capital is required, a second mortgage can be taken out. In total, up to 80% of the market value can be financed via a mortgage.
The mortgage holder pays mortgage interest in return for the mortgage. The interest rate is the same for both the first and second mortgages and is calculated on the basis of the current market situation, the loan-to-value ratio, and the creditworthiness of the borrower.
However, there is a difference in the repayment of the mortgage. The first mortgage does not necessarily have to be repaid. But the second mortgage must be paid off within 15 years or by retirement age.
Repayment: Repaying the mortgage
Repayments can be made in two ways.
Direct repayment: This is done through regular repayment directly to the mortgage lender. The advantages are that the loan amount and interest are reduced. However, the tax burden is higher than with indirect repayment.
Indirect repayment: With indirect repayments, payments are made into Pillar 3a, for example. Upon retirement, the entire capital is paid out to the bank.
Credit Suisse mortgage models
The Credit Suisse Fix mortgage is what is known as a fixed-rate mortgage. This allows you to plan and budget securely. It has a fixed term of 2–15 years at a fixed amount and a fixed mortgage interest rate.
Forward fix mortgage
The Forward fix mortgage also has a term of 2–15 years. With this option, the mortgage interest can be agreed upon up to three years before the disbursement of a new mortgage or the renewal of an existing one.
In this case, the interest rate consists of a base rate linked to the SARON rate and an individual surcharge. It is calculated at the end of a billing period of one to three months. The term is one, two, or three years.
SARON rollover mortgage
The SARON rollover mortgage works similarly. However, the interest rate is communicated and guaranteed at the beginning of the one-month tranche. The term can be one or two years.
The construction loan is suitable for construction projects. The loan amount is flexible and provides leeway for paying outstanding invoices during the construction phase. When everything is finished, the loan is converted into a mortgage.
Step by step to a mortgage
The process of obtaining a mortgage usually comprises the following steps:
- Arrange an appointment: The initial personal consultation is designed to highlight various options and answer any questions you may have.
- Find your ideal mortgage: A financing proposal is then prepared and a loan agreement is drawn up.
- Purchase the real estate: Use the loan to purchase the real estate. This serves as collateral for the mortgage lender.
- Payment: The mortgage is paid out.
- Payments to the mortgage lender: Mortgage interest and repayment of the loan; the loan is paid off in regular payments.