Author Topic: How much to pay off (mortgage, Switzerland)  (Read 977 times)

Erma

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How much to pay off (mortgage, Switzerland)
« on: February 23, 2017, 05:01:20 AM »
I want to know if my calculation is correct.

First some important information. I live in Switzerland. You don't have to pay off your mortgage ever. But you have to pay off 1/3 of the whole mortgage amount in 15 years. Mortgage interest has to be less than 1/3 of your gross income, but it is always calculated with 5% interest, 1% costs like water, heat, etc., 1,5% amortization (concerns only the first 15 years).

Early repayments don't work or you will at least pay all interest and probably a fine.

Our mortgage is 436'000 CHF at 1,24% (that's not a lot here, so no comments on the amount needed).

Our target amount for FIRE is around 1 million.

How much do I have to pay off of the mortgage that the bank will accept it?

We will have to renew the mortgage in 10 years. In this time we will have paid off 50'000 CHF (the last 5'000 would take another 5 years according to the bank). At this point I can pay as much money as I like and have at the bank to reduce the mortgage. I can do this always when Inrenew a mortgage.

At the moment I am saving another 6700 CHF per year in a tax-advantaged account which can be used for houses. My boyfriend will soon do the same, so that amount doubles.

I calculated that our mortgage (when stopping to work) must be lower than 222'222 CHF. Is that correct?

40000 (expected income) / 3 = 13'334 (max mortgage interest per year)

13'334 / 0,06 = 222'222 (remaining max mortgage amount)

I will need an additional 30'000 CHF to the above mentioned savings for the house, is that correct?

It is absolutely no problem to save those amounts, but I'm unsure about the math and perhaps there are ideas I haven't thought of.