Mortgages for multiple flats as an investor

[brydustin]

Hey everyone, curious if someone can help us here.

I own multiple properties privately, which I rent out. The banks calculate the affordability against my salary with the hypothetical mortgage rate of 5%.

I want to buy another property but one bank says that my income is not sufficient because of the affordability. It seems to me like they calculate it as if I was living in all of the flats and the income (rent) is not taken into account.

How do others do it? How could I own 20 flats without having to have a 7-figure income from my main job? Do I have to make a GmbH (but then don't the banks want to see the numbers for the last three years?).

I think it is absolutely ridiculous. For example, for one flat I pay 300chf mortgage interest/month which is significantly less than the rent (over 2k/month). If the interest rate would go back to 5% I could also increase the rent. Worst case I could always sell a flat and make multiple 100k. And on paper the banks own the flat anyway.

Curious to hear your thoughts.

 

[candleguy]

@brydustin Something seems odd here. I own multiple properties and the rental income I make has always been counted as additional income. Also, if you have slightly significant savings/securities, the banks look at those too. I don't even work with mortgages any longer. My bank granted me an overdraft which is secured through securities I hold with another provider. Get various offers and negotiate.

If you transfer the properties into a GmbH, you'll likely foot a hefty gains tax bill. This doesn't seem advisable to me. But check it with your tax counsel.

 

[brydustin]

@candleguy Thank you!

I also have savings/securities, but for the affordability calculation they don't take this into account. They only look at my income (my job).

The overdraft thing could work, but one bank charges me 4% on that, which is much higher than let's say a 1.9% mortgage rate for 5 years. Also I could only do that to a certain amount (e.g. 70% of portfolio value).

Transferring existing properties is not an option due to taxes, that I know, thanks.

 

[candleguy]

@brydustin I think you must try and find other offers. Again - not taking rental income and securities into consideration is strange. Pro tip: hit up Comparis to find providers for you. You "pay" with your data, but since most of it is public anyway, who cares?

Re overdraft: That's highly negotiable too, especially the interest rate. But sure, it's always linked to some security value, be it a portfolio or other assets.

 

[brydustin]

@candleguy Thank you so much. I am already talking with multiple providers.

I agree that they should include rent income - in some cases the rent income will be less than the 5% interest, amortisation and maintenance and running costs though. Let's say a 1M apartment with 800k mortgage - the bank calculates the monthly cost at almost 5k. I can't rent it out for 5k.

No idea how they could include securities. I have heard that some banks calculate that at 60% since they could go down but they don't calculate that as income. I could make an argument for dividends (maybe).

Again: thank you! The overdraft option I had not thought of yet.

 

[candleguy]

@brydustin The thought process must come away from income if you have significant other assets. How would retired folks renew their mortgages otherwise? Private banks are often quite a bit more flexible than the likes of Raiffeisen or ZKB.

 

[brydustin]

@candleguy Thanks. And agreed - I know some retired people that had to have inconvenient discussions because the bank had issues with the lower income. As if it is a surprise.

 

[utopiaticdill]

@candleguy Same here: The rental income is added to our Personal income from salaried work.

 

[colossal]

@candleguy Which bank are you using for the overdraft? What is the interest rate on that?

 

[confusedxx]

@candleguy Which bank? Some banks will prefer to keep each property as a separate account, and don’t add the rent as income

 

[candleguy]

@confusedxx Well, then you must find another bank. As I said - it's not set in stone and FINMA doesn't make any such requirements. It likely also depends on your general financial prowess.

 

[wassa78]

@brydustin Which bank is this?
Usually banks use the rental income to see if it would cover the 5% interest, 1% amortization (for loan to value >65%), and 10% of rental income / 1% maintenance, ~7% of the loan value. Only the part that isn‘t covered by rent has to be offset by your income (

 

[bort]

@brydustin Hire a mortgage broker from Comparis. It costs 250 chf but it’s worth every penny. The broker can then negotiate for you with different lenders. I can highly recommend ours, his name is Ege Coban.

The rental income should be added to your income. Maybe the advisor you talked to is not so competent?

UBS has this rule of calculating a theoretical case of 5% interest rate. But from my experience, every lender has different rules.

 

[brydustin]

@bort I've done this in the past and have done two deals with hypoplus, the mortgage brokerage of Comparis.

This time I only got an email:
"Aufgrund der aktuellen Marktlage erhalten wir sehr viele Anfragen. Aufgrund unserer Ressourcen ist es uns leider momentan nicht möglich Ihre Anfrage zu beantworten.

Um keine Zeit zu verlieren, empfehlen wir Ihnen, sich direkt an Ihre Hausbank zu wenden.

Wir bitten um Entschuldigung und danken für Ihr Verständnis."

I think they are struggling...