Residential property Own your own home: plan smart, budget smart

Achieving the goal of buying your own home requires a combination of astute financial planning and sound advice.

by UBS Insights 05 Mar 2020

Picture: UBS

Before you start poring over construction drawings and floor plans, you need to be clear about your financial situation. What stage are you at and how much money do you have? To buy your own home, you’ll first need to put up enough money of your own. This will generally be around 20 percent of the purchase price, with the remainder being financed by a mortgage from your bank.

Of this 20 percent, at least 10 percent must be your own “hard” savings, i.e., it cannot include money withdrawn early from your pension fund. Capital for the down payment can include credit balances held at your bank, funds from pillar 3a, the surrender value of insurance policies and proceeds from the sale of securities. An advance against inheritance or a gift can also be used for the down payment, but not interest-bearing or repayable loans.

To save up sufficient capital of your own, it’s important to have a savings or investment strategy and to stick to it. Which method of saving is suitable will depend on your individual circumstances and should be clarified with your client advisor. Possibilities include savings from investment solutions or deposits into pillar 3a. Not only can you use the latter to purchase residential property, you also get tax relief on these amounts, reducing your tax bill.

Before you start looking for your dream home, ask yourself what type of property and location would suit you best. Ultimately, you’ll have to reconcile your preferences and requirements with your actual budget, so think about the following points:

  • Do you want to build your own home or buy an existing property?
  • Are you willing to consider an older, cheaper property or some other existing building?
  • Are you looking for a condominium, a row house or something detached?
  • What sort of architecture, size and floor plan are important to you?

Tips for your search

If you want to live in a particular municipality or neighborhood, you should also search locally, for example using local vendors, architects or real estate agents. Your UBS client advisor has a lot of experience and can help you here.

Today, more than 90 percent of all properties for sale are advertised on the major internet platforms where you’ll find both existing homes and new construction projects. New construction activity has been at a high for years, so – with some regional differences – you'll currently find a lot to choose from. By refining your search to match your individual preferences, you’ll increase your chances of finding just what you’re looking for.

SARON replaces Libor

The Libor reference rate, which is currently the basis for money market mortgages, will be replaced by SARON at the end of 2021. SARON (Swiss Average Rate Overnight) is a short-term money market rate calculated based on transactions and quotes posted on the Swiss repo market. This change will have a major impact worldwide, especially on the mortgage market. We will start offering our clients UBS SARON Mortgage during the course of 2020.