Are you going to make a life-long financial commitment soon? Do you want to buy a house or an apartment? Here are some key figures on mortgage credit. It is almost like a long term loan taken out with a view to becoming the owner of a property. But how exactly is it different from a normal credit? Let's have a look:
A pyramidal stucture
A mortgage credit is usually used to cover 80% of the property value. The personal equity funds are then the 20% left. In Switzerland, mortgages are divided into two parts, known as senior and junior debt. The senior debt (first mortgage) covers 66,6% of the purchase value, while the junior debt (second mortgage), makes up to 13,4%. The repayment part of the latter must be paid over 15 years maximum and before the borrower reaches the age of retirement. A mortgage has a pyramidal structure with the senior debt at the bottom, then the junior debt, and the deposit funds at the top (not included in the debt).
Lending standards in Switzerland
In order to determine if you can benefit from a mortgage credit, banks will take three main criteria into account.
-
-
- The equity funds contributed by the borrower have to reach 20% of the property value
- The borrower’s income has to be enough (33%) to cover for the charges (interests, maintenance costs,…).
- The value of the property assessed by the bank has to be equal to the real estate’s price.
-
Credit’s cost and interest
In order to calculate the credit’s cost, you have to consider the debt’s amount (80%), the contract duration and the interest rate, which might change according to the solution that you choose.
-
-
- Fixed interest rate: determined by the bank and won’t change until the contract term.
- Variable rate: this one depends on the market and can fluctuate upwards and downwards.
- Libor rate: the Libor was named after the London Interbank Offered Rate. It is a serie of benchmark money market currencies and can be modified every 3, 6 or 12 years.
-
Any questions? Contact a specialist!
A mortgage credit usally represents a long-life heavy commitment. Therefore, it is never a bad idea to contact a specialist in order to know every details of the contract! Experienced advisors from CreditLoan will be able to compare offers for you and give you a free and non-binding quote!
