What Happens to the Family Home If One of the Partners Dies?
For a woman, the death of a partner can also have a significant financial impact on the residential property. Women should prepare for this scenario as early as possible.
What Will the Death of the Primary Breadwinner Mean for the Shared Residential Property?
In such a tragic case, contact should be made with the advisor at the bank where the couple took out their mortgage. The goal of the meeting will be to determine whether the residential property will continue to be affordable based on the survivors' benefits.
How Is the Affordability of a Residential Property Calculated?
First, the total costs need to be calculated, i.e. the imputed mortgage interest plus amortization plus ancillary costs. The conventional rule of thumb states that the total costs should not exceed one-third of the gross income.
Interest Rates Can Change; How Are They Calculated?
When determining affordability, the bank calculates an average interest rate of five percent. For a mortgage of 600,000 Swiss francs, the imputed interest costs therefore amount to 30,000 Swiss francs per year. That means a monthly amount of 2,500 Swiss francs as the maximum one-third of gross salary.
If the surviving partner cannot afford the mortgage costs of the shared property, that's a problem.
And the Ancillary Costs?
The rule of thumb regarding ancillary costs is to assume that they will account for 1 percent of the real estate's value. If the property has a value of 800,000 Swiss francs, expenditure of 8,000 Swiss francs per year can be expected for maintenance costs. This money should be used for the maintenance of the property, in order to preserve the value of the real estate; for example, repairs or ongoing ancillary costs.
And What Can Be Done If There Isn't Enough Money Available?
If the surviving partner cannot afford the costs of the shared property, that's a problem. In the worst-case scenario, it may lead to the property having to be sold in the middle of an already difficult situation. That is why it is important to take appropriate preventive measures to avoid this scenario. It is essential that questions concerning pension funds, private pension provision, life insurance, inheritance planning, and financial planning be addressed as early as possible.