Residential property checklist How to find and finance your own home

Many families dream of owning their own home and never having to pay rent again. But what do you need to think about before buying your own home? You first have to check whether the house you are interested in meets your needs, whether the purchase price is justified and what other costs there might be. The next step is to select the right financing option. The same holds true if you are buying a condominium. A good place to start is with a checklist so that you do not forget any important points.

Whether you are contemplating a house or a condominium, it’s expensive to buy in locations that are in demand. If the property you want to buy is in a major city, you have to calculate paying about 40 to 50 percent more than you would for a comparable home in a smaller regional location. In estimating the value of the real estate, there can be considerable differences in the value, depending on the basis for calculation. In some cases, it is possible that the market value determined by the bank and used in credit checks turns out to be lower than the price the seller is asking. If you nevertheless decide for this home, you will have to finance the difference from your own financial resources. Think carefully about whether the asking price is justified and fair. Consider the advantages and disadvantages before you make your decision.

The price, of course, is not the only factor affecting your decision. Many other factors also come into play. It is important that you increase your quality of life when you purchase a home or condominium for your own personal use. You also need to be clear in advance of your purchase whether you want to buy an existing property or a new one. You should ask yourself the following questions when buying a house or apartment: Do I like the location? Is it noisy? What is the local tax rate? Are there shopping opportunities nearby? How close are schools, medical clinics and cultural facilities? Is there a good connection to public transport? Is the quality of the house or apartment good? Are there enough rooms? Can you move in immediately?

Particularly if your dream home is still under construction, it is important that you check the creditworthiness and credibility of the contractual partner, i.e. the seller or the general contractor. Obtain references from past customers, find out more about projects they have already built and ask for a recent excerpt from the debt enforcement office. In addition, you should ensure that you know your rights should building defects arise and obtain contractual assurances that the contractor will deal with any shortcomings fairly and speedily. Carefully read all important documents and, if necessary, have a specialist go over them with you. The documents include the purchase agreement, the building specifications, the floor plan and, in the case of a condominium, all the condominium-related documentation.

Like everything in the world, the purchase of a house or condominium has its price. Most Swiss need to get a mortgage from the bank in order to fulfill the dream of owning their own home. To obtain a mortgage there are some specific criteria that need to be met. First, the bank will review your financial situation, checking that you have a regular, secure income. Your annual gross salary is important here, and other regular income may also be taken into account. In the case of a mortgage to be held jointly, the income of both partners can be added together.

Carefully calculate all items. Only in this way can you estimate whether you can financially sustain the dream of owning your own home over the long run. When estimating the fixed costs that you will have over the next few years, take into account the mortgage rate, amortization and the maintenance and home expenses. The fixed costs should not be more than one third of your total calculated income. The annual expenses for operating costs and for maintaining the value of the property are about one percent of the value. A mortgage must be reduced to two-thirds of the value of the property specified by the bank within 15 years of the date of issue. When estimating the costs, it is also advisable to plan in some reserves for items such as renovation or remodeling later and for unplanned repairs. Also keep in mind your expenses for recurring costs such as insurance, taxes, cable connection, etc.

As a rule: 80 percent of the purchase price can be financed with a mortgage, while the remaining 20 percent must come from your own resources. Of that, no more than 10 percent can come from your pension fund. The rest has to be “hard” cash. This hard cash can include, for example, gifts, your savings, an early inheritance, money raised by selling securities, or assets from your pillar 3a account. Young buyers in particular who have not saved much often decide to use their retirement savings to finance the purchase of a home. You should always keep the risks and consequences in mind, however, and search out options for closing any gaps that might arise in your retirement funding. If you still do not have enough equity, it is advisable to set up a pillar 3a retirement account and work toward saving the amount you need.