Buying a house - second mortgage

[aries_113]

Hi guys,
I tried to find an answer in this subreddit and also on the pages of the Swiss banks that offer mortgages but I can’t seem to comprehend yet the aspects of the second mortgage.

In which situation a second mortgage can help? Can I for example reduce my monthly payment or is it just for the case where I don’t have enough downpayment?

From the UBS website:
The main difference between the first and the second mortgage lies in the amortization obligation. The first mortgage has no maturity limit and doesn't have to be paid back after a specific number of years. The second mortgage, however, includes compulsory repayment.
The second mortgage must be amortized within 15 years or by the time you reach retirement age – whichever comes first.

It would be even better if I could find or create a spreadsheet calculator that includes the second mortgage.

Edit: to clarify my initial question, I know the info about the 67% and 13%.
What I do not understand is if I can lower the monthly payment with a second mortgage, because from other simulations that I saw for example o mustachianpost and thepoorswiss website, I see lower monthly payments compared to what I get when I input my numbers in the UBS online calculator for mortgage.

https://www.ubs.com/ch/en/private/mortgages/mortgage-calculator.html

 

[lv1515]

@aries_113 First Mortage up to 65% of the House, second from 65% to 80%

 

[xefere]

@lv1515 dull smile steep worry yam encourage reply act chubby tart

This post was mass deleted and anonymized with Redact

 

[ayosyrene]

@aries_113 Never ever split financing into two or more parts with different rates or length. You get locked in to the bank when you want to refinance. Would recommend a second loan for the amortization if you intend to pay it off quickly, under 5 years. Lock-in is terrible and institutions will try it with you, oh why don’t you take part fixed part variable and similar arguments. Look at repayment terms and not individually but jointly over all financing aspects.

 

[ponmolid]

@ayosyrene Very important and correct information here regarding the split (this is a game to keep you "locked" to the bank for the future).

 

[eloise]

@ayosyrene Huh? Financing split into two is extremely common in Switzerland as they offer libor / saron options.

 

[annaad0617]

@eloise It's not the split the issue, it's the different end dates. Banks will only offer you a loan on a collateral if it isn't (already partially) pledged to other banks.

With loans with different end dates, you're practically locked in and can't change bank since when one ends and can be renegotiated the other one is still active. At that point your negotiation power is 0 and you have to accept whatever they offer you.

 

[lilysmith2]

@annaad0617 u can switch the bank once your first one is about to run out. But need to have it correctly in the “Grundbuch” and a good setup.

 

[wyschong]

@lilysmith2 Not in CHFR, dunno about CHDE. There’s not bank that will come second after a first one on the Registre Foncier. This time is over.

 

[lizah]

@lilysmith2 No bank will ever accept that... Never heard of... Either it's everything or nothing...

NEVER split... Unless you take a fixed mortgage and a saron which can be refunded anytime. But I clearly don't get why people do that... Take a 20 years mortgage and forget about it...

 

[ayosyrene]

@eloise Common but wrong, unless you are the type of buying a property and living with conditions you agreed fifteen years ago. Nothing wrong, but best to keep your options open. Don’t do different terms and lengths. Pick one set of rates and length

 

[eloise]

@ayosyrene Ehhh no, that’s how it is in the states, not here in Switzerland. Plenty of people doing 60/40 fixed/libor when both rates are basically the same and the term is the same, they won’t lend past 10 years anyways and most of that loan is not amortizing anyways as it’s nearly impossible with how much the loan amounts are.

 

[aries_113]

@ayosyrene From the article on thepoorSwiss / mustachianpost website I saw that if you choose the durations to end at same time you can change the banks and renegotiate the conditions. Example 5 years and 10 years.

 

[letthrmusixsaveyourlife]

@aries_113 I wouldn’t go with the poor swiss, it‘s frugal not investing and only get‘s traction as it‘s in english.

 

[letthrmusixsaveyourlife]

@ayosyrene This isn‘t the US, it‘s common and needs to be at the same bank by law

https://moneypark.ch/news-wissen/hypotheken-und-zinsen/erste-und-zweite-hypothek-kurz-erklart/

 

[lilysmith2]

@ayosyrene it depends, I did split into 3 parts in 2017. The first part was running out 2 years ago, no problem to extend at a good rate! This year I amortized it. Next one is running out in a few year which will be amortized or extended, depending on my future’s situation.

 

[alexandrian34]

@aries_113 Does this still apply when you reimburse it indirectly with 3rd pillars A?

 

[nungirl_7]

@alexandrian34 Yes. Amortization is either direct (you reimburse regularly the bank and diminish your debt) or indirect by putting that amount on your 3a. This is a popular option.

 

[alexandrian34]

@nungirl_7 But thé 15 years, how is it done since 3rd pillars, especially in insurance, are more than 15 years contracts?

 

[nungirl_7]

@alexandrian34 I don't know how it works for insurance companies that provide mortgage. But in the case of a bank, the indirect amortization is done in the form of a 3a account. When signing the mortgage, the bank calculate the amortization amount that shall be reimbursed each month/trimester/year.

If the amount is lower than the max 3a deductible, you can always put more money.

After the time is over/amortization goal reached, your bank should not require you to put a minimal amount and you are free to contribute that this account at your liking. Which is probably not a good idea, since that for 3a account it is recommended to split your savings into several accounts to withdraw over several years and reduce the taxes amount.

Quick example:
For an good with a value of 1'000'000.
Max mortgage : 800'000
1st rank (66% of good value) : 660'000
2nd rank : 140'000 ... which must be paid over 15 years = 9333.-/year or 777/mo.
Note that if you buy together with your wife/SO, you can split that amortization in 2. With my wife, we both put a small amount on our 3rd pillars.