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Your own home after retirement

Sooner or later, old age limits us all. Some limits may be financial, while others may be health-related. At an early stage, therefore, you should consider whether your home will still be the right place to live as you get older, and whether you can continue to afford your mortgage. Also, how suitable is your home for older people?

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You may have spent years or even decades in your house or apartment, and naturally you still want to live there after you retire. But people’s financial situations often change with age, and often they have less money to live on. At an early stage, therefore, you should clarify the affordability of your home after you retire. You should also consider whether your home would still be suitable if you were no longer able to walk easily or had other health restrictions.

 

Tip: Unfortunately, banks and insurance companies are often quite inflexible when it comes to renegotiating with older debtors. You should therefore establish as soon as possible whether you will need to arrange refinancing or different financing for your home after retirement, so that you can start negotiating in good time.

 

 

 

 

Mortgages after retirement: what makes the most sense?
 

When your working life comes to an end, your financial situation also changes. The pensions paid out by the AHV, your pension fund and pillar 3 are often lower than your previous income. At the same time, your assets may increase because life insurance policies are paid out during this phase. This new situation also changes the options for financing your residential property.

 

It is possible to estimate accurately what you can expect after retirement a number of years in advance. Take advantage of this head start and check your mortgage. Is it due to be repaid soon anyway? Are there better alternatives? Get advice from an expert and develop a strategy together.

 

 

How to calculate affordability after retirement

Banks and insurance companies usually insist that you repay your mortgage down to 65% of its value by the time of your retirement. You also need to carry out an affordability calculation for your old age. It could look like this:

 

 

Situation

Value of the owner-occupied apartment

Annual income

Mortgage interest rate for affordability calculation (average)

 

CHF 600,000

CHF 51,000

5%

 

Maximum possible mortgage rate

Maximum possible housing costs (1/3 of CHF 51,000)

– incidental costs (1% of CHF 600,000)

Amount for mortgage interest

 

CHF 17,000

– CHF 6,000

CHF 11,000

 

Maximum possible mortgage

Interest rate 5%: CHF 11,000 / 5 x 100

 

CHF 220,000
 

 

Some insurance companies and banks are particularly accommodating towards pensioners with respect to the affordability calculation. For example, they apply an interest rate of only 4.5% or increase the maximum housing cost allowance to 40% of income. If a pensioner has assets, some financial institutions will classify a portion of it as income (2%–9%, depending on the financial institution).

 

If your financial situation after retirement does not permit you to continue financing your mortgage, then you should look for ways to reduce the mortgage:

  • If you have savings in pillar 3a, you can use a part of this to amortise your mortgage.
  • If you inherit money, you should save it for the time after you retire and use it to repay a part of your mortgage.
  • Are there any areas in your budget where you can make savings? Put this money aside so you can reduce your mortgage in old age.

 

Tip: Take advantage of periods when mortgage interest rates are particularly low to save money. Transfer the difference between the actual interest rate and the 5% average interest rate in the affordability calculation to your savings account. You can use these savings to pay off your mortgage after retirement.

 

 

 

 

Age-appropriate living: things to bear in mind

 

Your financial situation is one thing – but are you sure that your home is practical enough to live in during your old age? Is the house too large and the location too remote? Are the stairs too difficult? You should answer these questions honestly as you enter retirement. Often your own apartment with a terrace in a central location is the better solution. Before you decide whether to buy or rent, establish what conditions this new, age-appropriate home should fulfil.

 

  • Location: It’s a practical idea to ensure that there are shops, doctors and restaurants close to your new home. Make sure that there is a stop for the public transport network within easy reach on foot.
  • Around the property: You should be able to get to the front door at ground level, on a well-lit path. Check whether you could use all the paths around the house with a wheeled walking frame.
  • In the house: A lift is enormously important to enable you to reach the laundry room, cellar, garage and your apartment. Is the lift big enough to accommodate a wheelchair? If there is no lift in your dream property, check whether you could have a stairlift fitted to the first or second floor.
  • In the apartment: It is ideal if the apartment is only on one floor. The doors to the rooms and the balcony should be at least 80 cm wide and should have no thresholds. If the threshold to the balcony is no higher than 2.5 cm, it is normally passable with a walking frame.
  • Bathroom: If you need a disabled bathroom, it must be possible to adapt at least one bathroom in your new apartment without too much work.

 

If you would like to stay in your own home after retirement, then you should gradually start to carry out age-appropriate modifications. An accessible shower with no shower tray lip is particularly important, as is a kitchen where you can reach the main cupboards and appliances from a seated position. If possible, make sure that all the most important rooms in the house are on the same floor.

 

Tip: Do you have questions about age-appropriate and disabled-friendly living? The Swiss Centre for Barrier-Free Architecture can advise you: www.hindernisfreie-architektur.ch.

More about the topic

Financing your own home

What property can I afford and how can I find the right mortgage?

Living in your own home

How can I repay the mortgage cleverly and save taxes?

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