How do I buy property in Switzerland?
To buy a property in Switzerland, you'll need to obtain a loan from a financial institution, known as a "mortgage". mortgage" . To do this, you'll need to bring 20% of the property's purchase price. These 20% are called equity" and can come from the LPP, 3rd pillar A or B, and personal savings. However, only 10% of equity capital can come from the 2nd.
Pillar 3a or 3b to finance a property purchase?
Both Pillar 3a (tied personal pension provision) and Pillar 3b (unrestricted personal pension provision) can be used to finance the purchase of a property. However, it should be noted that Pillar 3a can only be used to finance a property at clean usei.e. a principal residence, while the pillar 3b can be used to finance all types of propertyvacation home, investment property, etc.
This is due to the fact that 3a is primarily designed to guarantee a comfortable retirement, and therefore withdrawal options are more limited.
3rd Pillar A funds can be used for:
- Buying or building a home for own use.
- Pay off an existing mortgage.
- Acquire shares in a housing unit for own use (e.g. cooperative).
Financing my primary residence with 3a
There are two ways to use your Pillar 3a assets to finance the purchase of your principal residence in Switzerland.
Early withdrawal (EPL)
As part of the home ownership incentive (EPL), you can apply for the partial or full withdrawal of your Pillar 3a capital (no minimum amount is required) to build up your contribution. This operation is authorized only if the capital is used to purchase or build your own home. principal residence.
Withdrawal is imposed on 1/5 of taxYou can do this every five years at the earliest.
Pledging
Rather than withdrawing your savings, you can pledge them to the bank to obtain a larger mortgage. This mechanism increases your borrowing capacity while keeping the tax advantages and yields of your Pillar 3a, without triggering immediate taxes. On the other hand, the pledged amount will have to be repaid at a later date when your mortgage is paid off, or when you reach retirement age, as part of a indirect amortization.
Pledge or early withdrawal?
- Benefits
- Disadvantages
- Early withdrawal
- Reduces mortgage debt
- Reduces interest expense
- Capital tax at time of withdrawal (reduced rate)
- Decrease in Pillar 3a assets
- Pledging
- Capital continues to grow
- No tax on capital benefits
- Higher interest expense
- Higher indebtedness
Until when can I withdraw funds from Pillar 3a?
You can withdraw your Pillar 3a assets up to 5 years before theordinary age of the AVS pension, i.e. 65 years old (currently age 64 for women). After this age, the full amount of your Pillar 3a assets can only be withdrawn by a single paymentor the entire capital available in your retirement savings account.
Should I use 3rd pillar funds for a property purchase?
For the purchase of your principal residence, opt first for pillar 3a, which allows either an early withdrawal (to build up the downpayment or amortize the mortgage), or a pledge (to increase your borrowing capacity) while benefiting from tax advantages.
If you need cash for a second home (vacation home) or a capital goodsPillar 3b can supplement your equity capital. However, it has fewer tax advantages and cannot be pledged like pillar 3a.
French 
English