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Owner-occupied home: Are mortgages viable on a pension?

An elderly couple sitting on a bench.
Condominiums after retirement: People who plan their mortgage financing long term can afford residential property with their pension even at an advanced age.
I am 50 and my wife is 48. We want to purchase a condominium. What do we need to mind so we can afford the apartment even when we are old?
Asked by Hannes W., Solothurn 07.06.2017

Stéphane Meusy
Stéphane Meusy, of Mortgages Division, Helvetia Insurance

Dear Mr W.,

Pensions from OASI and pension funds generally do not exceed 60 per cent of the income that can be insured through the LOB mandatory insurance. However, experience shows that pensioners need about 80 per cent of their previous income to maintain their previous standards of living. You need to close this gap by using the 3rd pillar. By purchasing a home, however, you may tie up precisely the funds that you will later require for your daily needs.

If you prematurely withdraw pension fund funds in order to purchase real estate, you therefore need to consider above all the reduction of your future pension that this will entail. If you choose this method of financing, you should close the pension gap as quickly as possible by making payments.

What is important is that your insurance or bank deems your mortgage to be financially viable even after you leave professional life. The mortgage interest and the maintenance costs must not exceed one third of your pension income. And this must also be the case if the mortgage interest were to climb to five per cent. If you cannot meet the viability requirements after you retire, you risk a termination of your mortgage and a forced sale.

Before you begin looking for a condominium, you therefore need to know the maximum amount of money it can cost so that you can continue to live in it during the third phase of your life as well. To assess your financial capacities for the long term, take advantage of the expertise of a pension advisor. A pension advisor calculates how much of your mortgage you need to have paid before you retire and how you can proceed as efficiently as possible: through indirect repayment with pillar 3a, which has tax benefits, or with additional funds from a flexible pension, for instance. Additionally, a pension advisor can also estimate whether you need insurance coverage in the event of the death or loss or earnings of yourself or your partner to secure the payment of your mortgage.

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