Mortgage debt: 10 questions answered

1. What is a mortgage debt?

While using a mortgage to finance a house, the bank accept to finance a part of the total real estate cost. The

mortgage debt is simply the sum “given” by the bank.

2. What is the mortgage amortization?

This is the repayment of the mortgage debt.

3. Is amortization mandatory?

In Switzerland, not necessarily, but highly recommended, as you will continue to pay interest for your mortgage debt.

4. How to calculate the monthy interest in a Swiss mortgage?

Interest is calculated annually deptending of the interest rate of your mortgage and the amount of your debt.

Thus, the monthy cost is COST = RATE X DEBT / 12. For example, a 400,000 Chf mortgage with a 2% interest

rate will represent a monthly charge of 400,000 X (2/100) / 12 = 667 Chf monthly.

5. Can the interest rate increase?

Yes. Also, a fixed-rate contract will guarantee you a fixed rate over the term of the contract.

6. Is that possible to transfer his mortgage debt to another bank?

Yes. Also, that means you’ll stop the mortgage with your current bank to choose another one.

7.What is direct amortization?

Direct amortization consists of reimbursing your banl at regular intervals. This will reduce directly your

mortgage debt.

8. What is indirect amortization?

Indirect amortization consists of establishing a life insurance as a 3rd pillar. Rather than paying off Your

mortgage, you put the money on this life insurance, which can serve you at retirement to repay all or part of your

mortgage at once.

9. Which is the most common amortization type?

Generally, owners prefer the indirect one. Indeed, even if the indirect amortization does not directly lower

your mortgage debt, and therefore the interest you have to pay, this solution offers interesting tax

deductions.

10. Can I deduce the interest of my debt from my tax declaration?

Yes. This is, indeed, why indirect amortization is interesting.

Article written by MultiCredit: MultiCredit