Residential property in your golden years: What are the options for your home?
Sooner or later, people who own a house or an apartment will need to consider what will happen with the property when they get older. It's not just your comfort you need to think about, but also your finances. Anyone wanting to err on the side of caution would be well advised to read up on the topic and start at an early stage to plan for the challenges and opportunities that senior living brings.
The most important points
As life expectancy increases and the birthrate declines, older people are accounting for an increasing proportion of the Swiss population. According to the Swiss Federal Statistical Office, the number of centenarians increased by 9.4% between 2020 and 2021, to 1,888 people. This figure is likely to increase even further over the coming decades. This trend has an impact on all aspects of life – from work to healthcare and even how we live. According to a survey by the Swiss Federal Statistical Office (PDF DE), the number of people living in a single-family dwelling decreases with age. At the same time, the number of people living in apartments increases with age. This clearly indicates that people often find their home no longer meets their changed needs in their later years.
Your circumstances change as you age. Your children may move out, for instance, leaving you with a single-family dwelling that is too big for just two people. Cleaning the various rooms and maintaining the garden can often become too much to handle on your own. So you may decide to rent out your home or sell it.
There are three options when it comes to purchasing a smaller condominium or moving from a house to an apartment:
- The equity from your current property can be offset directly against the new property, so you're not left with two mortgages.
- If you want to take your time selling your property in order to get a better price, you will need a bridging loan. This is because to purchase a property you will need additional disposable assets in the short term, or another mortgage if you do not have enough liquid assets.
- A third option is to rent out the property, thereby generating rental income that reduces the burden of paying two mortgages. The last option can be particularly useful if you want to sign over the house to your children at some point.
If you are planning to sell your property, start the process early on – because selling can take time. Putting your property on the market in plenty of time can help you to achieve a better price, because it will mean you're not under time pressure to sell. Giving yourself longer to plan can also make it easier when it comes to weighing up your options for your future living situation.
Selling your home often brings emotions to the surface: You bought your dream home, lived in it for many years, and brought up your children there. It's not easy for anyone to give that up. It is therefore worth examining unconventional solutions. That might mean converting the house to include separate living quarters, or having a shared home. Living with other people can present another exciting opportunity – you might live in a multi-generational house, for instance. This sort of arrangement involves people of different age groups living together in a housing or settlement community. Find out more in this article about multi-generational living.
We need different things from our homes as we age. A multi-level house, for instance, is often less suitable if someone is dependent on a wheelchair or is unable to climb stairs. To help you live without restriction within your own four walls, carrying out adaptations for old age can be a good idea. Find out how to renovate your home for senior living.
However, it's important to properly weigh the costs and the benefits of renovation work. If costs will be very high, it is often better to purchase an accessible or barrier-free condominium. And if this new home will also meet your new needs, so much the better. Public transportation links, local stores, and being close to friends and family also play a major role, particularly if you are no longer as mobile as you once were.
If the main earner of the household dies, there can be significant financial consequences. In the first instance, you should contact your bank to clarify whether the property is still affordable for you based on the survivors' benefits you will receive. In order to calculate the affordability of a mortgage, the rule of thumb is still that total costs must not exceed one-third of gross income.
If the surviving partner is unable to afford the formerly jointly owned property, the worst case is that the property will have to be sold. It's therefore important to prevent this scenario by taking the appropriate precautionary measures. Since women in particular tend to be worse off in this scenario, at an early stage you should start to think about your pension fund, private pension provision, life insurance, inheritance planning, and also financial planning.
If you want to pass on your home on to relatives rather than selling it, make sure you do so at the right time: If the house is signed over too early, the younger generation may lack the capital. Too late, and your children may already have found their own dream home. All this should be discussed as a family at an early stage during your lifetime.
It's possible for the parents to continue living in their house even after they have signed it over to one of their children. A right of residence or right of usufruct is agreed for this purpose. If the parents have residential rights, they continue to live in the house and are responsible for maintaining it. Rights of usufruct go even further: The parents can dispose of the house and also continue to pay the mortgage and any interest. The benefit in these scenarios is that ownership structures are clarified at an early stage. If the parents cannot or no longer wish to live in the property, the whole process becomes quicker and easier.
It pays to read up on Swiss inheritance law: If there are several children, the change of ownership must be properly arranged, since each child is entitled to their own legal share of the inheritance. In order to prevent any legal issues, the parents or the child to whom the house is being signed over can compensate any siblings. If they do not have the required capital, the existing mortgage on the property can be increased in order to generate more capital for the payment. Affordability must still be ensured in such a scenario, however. The heirs must be able to afford any repayments and ancillary costs.
As we get older, our financial situation is no longer quite in step with our living arrangements. Despite receiving a state pension and pension fund benefits, many people find that their income reduces when they retire. This affects mortgage affordability, and you may no longer meet the criteria specified by your bank. If property owners want to change lender or increase their mortgage to pay for major renovations, this could become a challenge.
If you know that your income is likely to reduce when you retire, you should make appropriate provision at an early stage. If a large portion of your assets is tied up in your house, there may be opportunities to expand your financial scope. You could acquire additional liquidity by increasing an existing mortgage, for instance. In addition, you could save on costs by economizing, or perhaps by moving from a house to an apartment. You could also use your house as a source of retirement income and rent it out.
Find out how to properly finance your home.