Optimizing Barbara and Thomas Müller's financial situation.

Fallbeispiel Ehepaar Müller

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 67% 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 11,009 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 fifteen 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 73,387 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

  Today In retirement
Mortgage amount CHF 500 000 CHF 393 280
Interest costs (assumed interest rate of 5%) CHF   25 000 CHF   19 664
Amortization CHF     2 222  
Maintenance and ancillary costs CHF     7 000 CHF    7 000
Total ongoing costs (assumed) CHF   34 222 CHF  26 664
Gross income CHF 130 000 CHF  80 000
Affordability (max. 33.33%) 26% 33%

Numbers represent annual figures unless stated otherwise. The tax consequences are not included in the table.

 

Amortizing an additional CHF 73,387 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.