Buying a home can seem like a more attractive financial option than renting, considering the equity that is built up over the years and that home prices continue to increase steadily. It is important, however, to take into account all of the financial costs of buying a home and what experts sometimes call “the two golden rules”.
Those rules are capital and income. First, a potential buyer must have at least 20% of the purchase price of the home in capital for a down payment if it is to be the primary residence. And second, the amount equivalent to 6% of the purchase price should be less than one third of the buyer’s annual gross income. For example, for a property costing CHF 800,000, the buyer would need to put down a minimum of CHF 160,000 and have an annual income of at least CHF 144,000. Sites such as hausinfo.ch as well as many of the banks provide mortgage calculators – often but not always in French – to determine the maximum amount a person could spend purchasing a home, based on income, taxes, years to retirement and other factors.
Buyers and sellers will both pay fees, and homeowners will pay regular taxes including an income tax on the equivalent rental value of your property. Many cantons also levy a property tax. There are also restrictions on how long a second-home owner has to keep the home before selling it.
Will investing the money to purchase a property guarantee a return on investment down the road? A recent study conducted by the Federal Institute of Technology Zurich (ETH Zurich) and www.comparis.ch found that the median per-square-metre asking price of apartments and houses in Switzerland has increased by at least 25% since 2007 in most areas of the country. It will come as no surprise to potential buyers that Vaud and Geneva make appearances among the ten places with the largest price increases for apartments and houses over the past seven years.
