Real estate knowledge explained simply.

For the review, not only the current interest rate counts. Often an imputed interest rate, an allowance for maintenance and ancillary costs, and the necessary amortisation are added together. Further obligations such as leasing, loans or alimony can additionally reduce the available income. As a common guideline, the burden should not exceed roughly one third of gross income; each institution reviews according to its own criteria.

The loan-to-value is the ratio between the mortgage and the property value recognised by the bank. With a CHF 800’000 mortgage and a CHF 1’000’000 lending value it amounts to 80 %. The lending value can be below the purchase price. In that case the possible financing becomes smaller and the equity requirement larger.

The portion up to roughly two thirds of the lending value is often referred to as the 1st mortgage. The part above that, up to the maximum accepted loan-to-value, is regarded as the 2nd mortgage and usually has to be reduced within a period, often by retirement or within 15 years. The bank determines the specific structure.

With direct amortisation the mortgage decreases through ongoing repayments. With indirect amortisation the money flows, for example, into a pledged pillar 3a; the mortgage initially remains the same. Direct repayment reduces the debt, indirect repayment combines financing with retirement provision. Taxes, fees, retirement goal and flexibility must be compared together.

A fixed-rate mortgage fixes the interest rate for an agreed term and creates planning security, but can be expensive in the event of an early exit. A SARON mortgage follows the money market plus the bank margin; its burden can rise or fall. Variable mortgages have no fixed term but are often more expensive. The decisive factors are risk capacity, planning horizon and the need for flexibility.

With refinancing, an expiring or existing mortgage is reorganised. Not only the interest rate counts: terms, staggering, amortisation, notice periods, early-repayment costs, retirement and future renovations belong in the comparison.

For larger construction and conversion projects, payments are often released according to construction progress. The bank can check quotes, invoices and own work. After completion, the construction financing is often transferred into a mortgage. A realistic payment plan and a reserve prevent liquidity shortfalls.

The land register documents ownership, the property description, easements, real burdens, priority notices and mortgage rights. An extract therefore shows not only who owns the property, but also rights and encumbrances that can influence use and value. Before a purchase, unclear entries should be explained.

The mortgage certificate serves the bank as mortgage security. Register mortgage certificates are kept electronically in the land register. With a mortgage increase, the bank checks whether the amount and rank of the existing mortgage certificates are sufficient. A new creation or increase can incur notary and land register costs.

The rank determines the order in which mortgage securities are taken into account in a realisation. A security in the 1st rank ranks before subsequent ranks and is therefore stronger for the bank. Amount, rank and free pledge positions must fit together with a mortgage increase.

Right of way, residential right, usufruct, right of passage for utilities or right to build closer are typical easements. They can entitle or encumber a property. What matters is not only the short entry in the extract, but the complete document with content, area, duration and beneficiaries.

A property purchase is publicly notarised. In the contract, the purchase price, payment, transfer of benefit and risk, warranty, inventory, taxes, fees and securities are to be clarified. A reservation agreement should only be signed once the withdrawal conditions, reservation payment and financeability are understood.

Under certain conditions, craftsmen can have a lien on the property registered for unpaid work. Owners should therefore monitor payment statuses, subcontractors and deadlines and seek legal advice in case of uncertainty.

Pension capital may be used within the legal framework for owner-occupied home ownership. An advance withdrawal increases the available equity, but reduces pension assets and triggers a separate tax. With pledging, the capital remains in place but serves as security. Family, risk protection and retirement belong inevitably in the decision.

You own the apartment under special right and at the same time a share in communal parts such as the roof, façade, heating and surroundings. Check the regulations, value quota, meeting minutes, planned renovations, insurance and the status of the renovation fund. A low fund can mean later special contributions.

Regular maintenance protects usability and value. Reserves should be based on the age of important building components: roof, façade, heating, windows, pipes, kitchen and bathroom. Building, liability and, depending on the property, further insurance policies are to be checked for coverage, deductible and exclusions.

The real value considers, in simplified terms, land, building, age-related depreciation and surroundings. The capitalised earnings value derives the value from sustainably achievable net earnings and is particularly important for rental properties. The market value is the estimate of a market price achievable under normal conditions. Depending on the property, methods are combined.

The gross yield compares annual rent and purchase price, but ignores costs. The net yield takes owner costs into account. The equity yield relates the remaining earnings to the equity invested and is amplified by debt financing, in good as well as bad scenarios.

The net earnings are divided by the capitalisation rate in order to derive a capitalised earnings value. A low rate leads computationally to a higher value. The appropriate rate depends on location, condition, rental situation, interest rates and risks; therefore a figure without reference to the property is not serious.