Optimizing Barbara and Thomas Müller's financial situation.
The Müllers have recently purchased a beautiful apartment for CHF 700,000. They financed the purchase with a Fixed-Rate Mortgage of CHF 500,000. By the time they retire, the Müllers will have directly amortized 65% of their mortgage. Together with their UBS advisor, the Müllers have performed an assessment to establish what their financial situation will be once they retire. The analysis has shown that Barbara and Thomas Müller will have an annual income shortfall of CHF 10,152 in retirement. They need to optimize their financial situation.
The UBS client advisor proposes that Barbara and Thomas Müller amortize a greater amount of their mortgage over the next ten years. This will reduce the amount of interest they will have to pay in retirement. In order to ensure that they will be able to afford their home once they retire, the Müllers will need to amortize an additional CHF 67,000 of their mortgage.
The Müllers decide to save up the funds required to cover the deficit in a restricted retirement savings account 3a, using the indirect amortization model. Once they reach retirement age, they can use this additional capital to reduce their current mortgage to the targeted level.
Optimized financial situation
|Mortgage amount||CHF 500 000||CHF 388 000|
|Interest costs (assumed interest rate of 5%)||CHF 25 000||CHF 19 400|
|Amortization||CHF 5 000|
|Maintenance and ancillary costs||CHF 7 000||CHF 7 000|
|Total ongoing costs (assumed)||CHF 37 000||CHF 26 400|
|Gross income||CHF 130 000||CHF 80 000|
|Affordability (max. 33%)||28%||33%|
Numbers represent annual figures unless stated otherwise. The tax consequences are not included in the table.
Amortizing an additional CHF 67,000 of their mortgage means that the Müllers will still be able to afford their property once they retire. This is how they can save up the necessary additional capital before their retirement.
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