.Glossary







Mortgages Glossary

1st mortgage

The loan-to-value ratio lies within the range of the first mortgage if 65% or less of the purchase price has been financed by the bank and 35% or more has been financed by the owner.

2nd mortgage

The loan-to-value ratio lies within the range of the second mortgage if between 65% and 80% of the purchase price has been financed by the bank and 20% or more has been financed by the owner. Given the higher loan-to-value ratio and the associated higher risk of loss, the mortgage interest rate is higher than for first mortgages.

2nd pillar

You can use your pension fund assets to finance owner-occupied property. To ascertain the available amount, check your benefit statement or ask your pension fund.

3rd pillar

private pension provision with banks or insurers You can use the savings from your private pension cover to finance owner-occupied property. Funds may be withdrawn every 5 years.

Amortization

Repayment of a loan in installments, as a general rule 1% of the mortgage (see also direct amortization and indirect amortization).

Building volume

You can find the building volume (cubage or converted space) in the extract from the cantonal building insurance, in plans, sales documentation or in the extract from the Land Register.

Cadastral survey map

Contains streets, plot boundaries, buildings. Updated by the Land Registry each time there is a change in the property.

Capital market

The capital market is a market for medium and long-term investments of 1 year and above.

Compensation

When a client buys into or buys out of a portfolio mortgage, compensation is credited or debited to the client. These payments offset the difference between the basic interest rate of the portfolio and the current market rate.

Condominium management regulations

Provisions governing the collective management and use of the whole property as well as a list of the rights and obligations of the unit owners.

Construction zone

According to planning and construction law, communities divide their land into zones, which define how the properties within them are to be used.

Direct amortization

The size of your mortgage decreases with each payment. Even taking into account the somewhat lower interest payments, you generally fare better with indirect amortization thanks to the tax advantages (see indirect amortization).

Early withdrawal from second/third pillar

see second pillar and third pillar

Economic viability

The burden on a person’s income that the cost of the property will incur, in per cent.

Extract from the Land Register

Contains detailed information on a property, e.g. owners, purchase date, plot number, easements.

Family home

Property that the family occupies and that is therefore protected by law. For this reason, the consent of both spouses is required before the property can be bought, financed or sold.

Fit-out standard

What is the quality of the materials and fittings used? Are there special structural or material features in the living areas, kitchen, bathrooms, flooring and wall coverings?

Gross floor area

Net living area plus size of all wall cross-sections (ground plan of interior and exterior walls), not to be confused with the floor space.

Imputed interest rate

average expected rate of interest over the next few years Buying your own home is equivalent to investing in the future.

Indirect amortization

Only possible with owner-occupied property. Instead of paying off your mortgage directly, you invest in your invest account (third pillar).

This means your retirement savings go up while the mortgage amount (principal) remains the same, allowing you to save for your retirement.

You also save on tax, because you can deduct this repayment and the full mortgage interest from your taxable income (incl. imputed rental value).

Land Register

The most important information about a property is contained in the land register.

LIBOR

LIBOR (London Interbank Offered Rate) is the rate at which banks place money on deposit short-term with other prime banks. It serves as a general reference rate.

Life tenancy in favor of

A person listed in the Land Register has the right to live in the property for the specified duration.

Loan-to-value ratio

Ratio of the mortgage to the market value or purchase price of a property in per cent.

Location quality

How would you rate the location of your property within your community or district in terms of: desirability (popularity, prestige value of the residential location, social stratum, attractiveness of the neighboring residential area), view, sunshine (e.g. north-/south-facing), noise level.

The easiest way of doing this is by means of the exclusion principle: Is the actual location one of the best/most attractive areas or one of the less attractive areas?

Maintenance

Cost of work to keep a property in good repair.

Market value

Estimated value calculated by professional property appraisers which reflects the market value.

Money market

The money market is a market for short-term funds with a maturity of less than 12 months.

Mortgage

In simplified terms, a mortgage is the usual form of financing a property, with the property serving as collateral for the bank.

Net living area

Floor space of the rooms which are occupied all year round (incl. kitchen, bathroom, toilet, halls and stairwells within the home, individual rooms/attic rooms in the same building; excl. balconies, terraces, loggias, washrooms, saunas, attics/cellars, storerooms, shelters and garbage rooms).

Net rental income

Rental income from a property which you own minus the cost of this property (mortgage interest, ancillary costs, maintenance costs).

option “Advantage”

We recommend the “Advantage” option if you do not have much time to look after your mortgage.

option “Basic”

We recommend the “Basic” option if you want your interest payments to remain constant.

option “Trendy”

We recommend the “Trendy” option if you have financial room for man oeuvre.

Own funds

Money which the purchaser puts up him-/herself to finance a property. The funds are paid in cash and should amount to around 20% of the purchase price. These funds typically come from savings, inheritance or third-pillar retirement provision.

Own work

Building and renovation work which the purchaser of the house or his/her family and friends carry out themselves.

Preliminary Contract

The buyer and seller use the Preliminary Contract to state their intentions to enter into a main contract. It can be signed prior to the availability of all the information required for a Purchase Contract. The Preliminary Contract must be notarized as a public document.

Purchase Contract

The Purchase Contract sets out both the buyer’s and the seller’s obligations arising out of the sale and purchase of a property. It is required to be a notarized public document.

Purchase price

The purchase price does not include any transaction costs such as taxes or fees payable to central/local government.

Real Estate Transfer Tax

Most Cantons levy a Real Estate Transfer Tax. The tax is calculated on the purchase price or on an official estimated value in the case of gifts and inheritances. Normally this tax is paid half by the buyer and half by the seller.

Real Property Gains Tax

Real Property Gains Tax is levied by the Cantons. It is calculated on a property’s increase in value as shown by the difference between its purchase price and subsequent selling price. It is paid by the seller. It is, therefore, very important that you keep all purchase and construction invoices. The Federal Government only taxes profits on the disposal of real property if it is business income.

Restricted life insurance

A restricted life insurance policy serves as pension cover and therefore entitles you to tax advantages (contributions can be deducted from your taxable income). However, there are restrictions on what the money paid in can be used for (e.g. withdrawal is not possible until you reach retirement age).

Site plan

Shows the location of real estate and the buildings in the corresponding community, street, etc.

Size of real estate

Proportion of the real estate (plot) which is to be used for construction according to the zoning regulations, including the space that the building will take up. Usually, the size of the real estate is the same as the proportion of the land used for construction. Certain areas have no construction status, e.g. parks, protected areas, forest/agricultural zones.

State of the property

Properties less than 4 years old are classed as new. Older properties are assessed on the basis of the state of the interior (kitchen, bathroom, walls, floors, fittings and fixtures) and exterior/shell (such as the facade, roof, windows).

Surety

Contractual obligation of the guarantor to be liable for the payment of the debt of a third party.

Third-party loan

Money provided by third parties.

Unrestricted life insurance

With an unrestricted life insurance policy, you are free to use the money paid in however you wish. However, the contributions are not tax-deductible.

Usufruct in favor of

A person listed in the Land Register has the right to income from the leased property for the specified duration. However, they often have to pay the maintenance costs as well.

Value-reducing easements

A charge on a property noted in the Land Register which reduces the value thereof. Public rights of way/access or other rights of way (e.g. for water, gas or electricity cables) do not fall into this category.