“Securing Your Home in Retirement: Flexible Mortgage Solutions”

Basel, 12.03.2024

Securing Your Home in Retirement: Flexible Mortgage Solutions

A client reached out to us with a particular concern, and we are pleased to share our recommendation with you.

“We are retiring in 2024 and will soon need to renew our ongoing mortgage. We would like to spend a few more years in our house, though the exact duration is uncertain. We are looking for a solution that offers us flexibility for the future without committing us long-term. What recommendations do you have for us, and what should we consider?”

The desire to remain in one’s own home after retirement is common among more than half of all Swiss citizens. It is important to note that from retirement age, your mortgage should not exceed two-thirds of the property value and should be affordable on a reduced income.

Securing Affordability in Retirement through Amortization

Many property owners rely on their professional and state pensions after retirement, viewing their home as an additional retirement reserve. However, it should be considered that this may only cover about 50 to 70 percent of the previous income. For a property valued at one million Swiss Francs, a mortgage up to CHF 650,000 would be possible, requiring an income of CHF 130,000 – regardless of the agreed interest rate. If income does not suffice, it is possible to amortize the mortgage to CHF 500,000 through saved capital, which would then require an income of CHF 105,000. In cases of insufficient income, drawing down on assets can be considered as an additional source of income. This involves paying yourself a monthly pension from your assets, supplementing incomes from AHV and pension funds, thus ensuring affordability in retirement.

Fixed-Rate Mortgage with Free Exit Option on Sale

Especially in times of rapidly rising interest rates, as observed in the first half of 2022, it is advisable to compare different offers before concluding or extending a mortgage and to seek an independent second opinion. This allows securing attractive conditions across all terms despite increased interest rates. Furthermore, the appeal of a fixed-rate mortgage in retirement is enhanced by an increasing number of mortgage providers waiving the early repayment fee if the property is sold before the end of the term. This makes long-term mortgages attractive for retirement living, especially benefiting clients with low-risk profiles who can sell their property early without incurring high early repayment fees.

Transferring or Handing Over the Mortgage

Another option is to transfer the mortgage to another property. If you wish to move in retirement but retain ownership, the existing mortgage can usually be transferred to the new property without additional costs. If, however, you no longer wish to own property, there is the possibility of handing over the ongoing mortgage to the buyer. Whether the buyer accepts the offer strongly depends on the current conditions and the applicable interest rate of your mortgage.

Would you like to know if you can continue to live in your home in retirement? Contact us.