When buying a property, you need to put forward equity capital of at least 20 percent of the market value. The rest can be financed with mortgages. The first mortgage covers up to 66 percent. If you need more debt capital, you will have to take out a second mortgage. Unlike the first mortgage, the second must be paid back. This kind of repayment is called amortization.
Paying in installments The second mortgage must be repaid within 15 years, at the latest by the age of 65.
If you choose direct amortization, you will pay the mortgage back in regular installments. By doing this, you reduce mortgage debt and decrease interest payments.
The disadvantage is that the tax burden increases. You can deduct the mortgage debt from taxable assets and the mortgage interest from taxable income.
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Indirect amortization: saving via your pension
With indirect amortization, the mortgage amount remains stable. You save in a 3rd pillar pension account or pension securities account.
The Credit Suisse Privilegia Pillar 3 pension foundation offers interesting securities solutions that enable you to benefit from higher potential returns. By the age of 65 at the latest, you withdraw the saved capital and use it to pay back the agreed mortgage sum.
Thereby the mortgage debt does not decrease over the years and you benefit from higher tax deductions.
In addition, the contributions to Pillar 3a can be deducted from your taxable income.
Which amortization model is the right one for you depends on your personal situation.
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