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12 questions about mortgages from insurance companies

Many real estate buyers aren't aware that insurance companies offer mortgages, too. They may not know that insurance companies offer very attractive terms, especially for long-running contracts. The following 12 questions and answers cover the most important aspects of home financing.

12  June 2017, text: Hansjörg Ryser, photo: iStock

A "Welcome" doormat lies in front of an open front door.
Insurance companies often give cheaper mortgages than banks, especially for long-running contracts.

Do I have to already be a customer to get a mortgage from an insurance company?

No, that is not a condition. However, customers usually benefit from additional perquisites.

How do insurance companies calculate economic viability?

They follow the same basic principles as a bank: payments should not exceed one-third of gross income, assuming an interest rate of five percent and maintenance costs of one percent each year. Repayment for a second mortgage is included in the invoice.

What is the maximum loan-to-value ratio?

Prospective buyers must have at least 20 percent equity in their home. Also, at least ten percent must be taken from their own savings, not from an occupational benefit scheme.

Do insurance companies also offer second mortgages?

Yes. The first mortgage can cover up to 65 percent of the property’s value. Once the buyer's down payment has been deducted, the rest is often financed with a second mortgage.

How can insurance companies often offer cheaper mortgages than banks?

Insurance companies finance mortgages with premiums that cover the same period. This almost completely eliminates the interest rate risk and so significantly lowers the hedging costs.

Why do insurance companies offer mortgages?

Insurance companies have to put their customers' premiums in secure long-term investments that generate the income they need to meet their obligations, such as paying guaranteed interest on premiums. While federal bonds and equally secure investments pay zero or even negative interest, mortgages still offer stable long-term income with a similar risk profile.

What terms does Helvetia offer?

Helvetia offers variable-rate mortgages and fixed-rate mortgages with terms from two to 20 years.

Is an indirect repayment possible?

Insurance companies do offer mortgages with indirect repayment, for example, through a life insurance policy.

Is repayment obligatory?

Yes. The second mortgage must be repaid by the time of retirement.

Do insurance companies also offer mortgages for holiday apartments?

Yes. Helvetia offers mortgages for second homes. However, they must not be rented out and or exceed a loan-to-value ratio of 50 percent. Also, the principal residence must have been financed through Helvetia as well.

Do you also offer financing for rental or business properties?

Helvetia offers mortgages for these types of properties in certain circumstances. The maximum loan-to-value ratio is 65 percent.

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