News and Guide

News from DL MoneyPark and information on the financial market and Swiss romande real estate

Published by : dl

Direct or indirect amortisation?

Here is a quantitative comparison of a direct and an indirect amortisation scenario:

Example: simplified calculation for a loan of CHF 500,000 for one year (fixed rate of 3%) with an annual amortisation of CHF 5,000 and a marginal tax rate of 35% (taxable income around CHF 120,000).

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3rd pillar bank deposit

The 3rd pillar bank deposit is a private pension account that is blocked under certain conditions. This plan offers more flexibility regarding contributions as well as a low administrative fee because it does not include any insurance benefits.

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3rd pillar insurance

In the case of disability or death following and illness, the 1st pillar (old age and survivors' insurance (AVS), disability insurance (AI), and income compensation (APG)) and the 2nd pillar (occupational pension fund (LPP)) usually provide only part of the previous income. There are multiple variations, which are all dependent on pension fund benefits. To address these deficiencies, an insurance product is even more desirable if the pension plan has been withdrawn to purchase a property.

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Linked 3rd pillar A

An employee subject to the occupational pension plan (LPP) can sign up for the linked 3rd pillar A up to CHF 6,826 /year from 1 January 2019 . For workers and the self-employed without LPP, it is 20% of net profit from activities up to a maximum of CHF 34,128 /year starting in 2019 .

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Private 3rd pillar B

The possibility of taking out a private 3rd pillar B (or unrestricted) pension insurance is o offered to everyone who lives in Switzerland or abroad, whether employed or not. Such insurance is ideal for a housewife or an employee who intends to terminate his or her gainful activity in the near future.

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Whole life insurance

This type of insurance is not well known because few companies offer it in their range of products. Nevertheless, it is an ideal "tool" that should be considered in personalised advice on real estate financing, distribution during lifetime, and inheritance planning.

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Construction loan optimisation

For the buyer, construction financing often begins with a seemingly harmless construction loan. Nevertheless, the quarterly commission of such a loan is often neglected and becomes a sore spot down the road.

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Mortgage loans

A mortgage loan is a long-term credit, guaranteed by a right to real estate lien. This credit involves a payment (in theory a one-time transfer of funds) to the debtor. The debtor is responsible for paying interest and eventual amortisations according to the contract terms.

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Fixed rate

The fixed rate allows you to precisely calculate your budget given that it doesn't change during the chosen period. Following the evolution of the estimate (policy of the Swiss National Bank) and the rate projections, short-term fixed rates could be higher than the variable rate.

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Variable rate

This rate varies depending on the capital and monetary markets. Therefore, it can be increased or decreased at any time. The impact of these modifications are sometimes not felt until later. In 1991, these rates reached an all-time high at 7.5% even 8% for a short period.

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