For many people, home ownership is a big dream and a life goal. In view of constantly rising real estate prices, this is difficult to achieve financially in many cases. Financing via third parties requires a high proportion of equity. Using the 2nd pillar for financing is a popular means of doing so. What needs to be considered?
The 2nd pillar as a source of financing
In Switzerland, the Federal Law on Occupational Retirement, Survivors’ and Disability Pension Plans(BVG) allows pension fund assets to be used for the purchase of owner-occupied residential property. This option can be used either through an early withdrawal or by pledging the pension fund assets.
Advance withdrawal from the pension fund: With an advance withdrawal, the pension assets are withdrawn directly from the pension fund and used as equity for the purchase of a house or apartment. This variant makes it possible to bring in more equity, which can make financing easier. However, this creates pension gaps that must be closed by the time you retire in order not to jeopardize your retirement provision.
Pledging the pension fund: As an alternative to early withdrawal, the pension assets can also be pledged. In this case, the money remains in the pension fund, but serves as collateral for the bank, which in return grants a higher mortgage amount. This enables additional borrowed capital for the purchase of real estate, while the retirement benefits and insurance cover are retained.
Why does it make sense to use the 2nd pillar to finance your own home?
Higher equity: With an advance withdrawal or pledge, buyers can contribute more equity. This leads to a reduction in the mortgage and can therefore lower housing costs in the long term.
Tax aspects: Advance withdrawals are treated at a reduced tax rate, which can lead to certain tax savings. Pledges are tax-neutral, as the money remains in the pension fund.
Flexibility: The use of the 2nd pillar also makes it possible to support the financing of renovations or the amortization of the mortgage.
What needs to be considered?
Pension gaps: The early withdrawal creates pension gaps that must be filled until retirement in order not to jeopardize benefit entitlements.
Higher costs: A pledge can lead to higher mortgage interest rates. The bank bears an additional risk, which should be taken into account when calculating the total costs.
Risks and conditions: There are certain conditions and risks, such as the possibility of pledge realization or restrictions due to pension fund regulations, which must be taken into account before a decision is made.
Financial planning and advice
Before you decide to make an early withdrawal from your occupational pension, thorough financial planning is essential. It is advisable to seek professional financial advice. This enables you to better understand the long-term effects on your pension provision and to examine alternative financing options.
Conclusion
Using the 2nd pillar for home financing offers clear advantages in terms of higher equity and tax relief. However, this decision should be carefully considered, as it can have long-term effects on your retirement provision. Before making a decision, it is advisable to consult a financial advisor or the pension fund about the individual options and risks. This allows you to make an informed decision that takes into account both your current and long-term financial goals.
All data are without guarantee. The information on these Internet pages has been carefully researched. Nevertheless, no liability can be assumed for the accuracy of the information provided.
