Condominiums - Definition and facts
The condominium is a special kind of ownership in the Apartment Ownership Act. It enables the option to acquire ownership of a single apartment within a building. In this country, this means registered ownership (entered in the land registry) of a floor inside a building.
Buying or renting an apartment?
This decisive question should be considered carefully and poses a challenge for many. Should I make my dream of owning an apartment in the city a reality? Or should I continue renting an apartment? Do I want more living space or is the location more important to me? Do I save taxes if I own my apartment? Is an apartment a worthwhile financial investment?
We will point out what you should carefully consider when purchasing your own apartment and what mistakes to avoid making.
Is buying really cheaper than renting?
Living in your own home isn't necessarily cheaper. Sure, it is generally financially sensible to purchase your own apartment, but it always depends on the respective personal situation.
The current low interest rate makes purchasing your own home very attractive at the moment. But this bonus is qualified in part by the increase in real estate prices. The higher the apartment price in the city or municipality and/or the more the location has grown, the more attractive it is to rent an apartment there. Nowhere else have rental apartments become more expensive to the same degree as here.
Why it is worthwhile to purchase your own apartment:
- The purchase of an apartment is ideal for your pension plan. If you have paid a certain degree of your debts by the time you retire, there is more of your pension left for personal use.
- As an owner of your own apartment you are free from rent increases.
- The condominium can be rented out at any time, which can potentially generate additional income.
- Your children can profit from the inheritance of capital contribution.
How much capital do I need for my apartment?
In order to finance your dream real estate you need at least 20% of the purchase price from own funds in order to obtain the remaining 80% as a mortgage from the bank.
Composition of equity capital:
10% of your equity capital can stem from money for occupational retirement benefits or pension fund (2nd pillar). The other 10% should be actual equity capital from:
- Bank accounts and savings accounts
- Life insurance (buy-back value)
- Anticipatory succession or loans
- Money from tied private provisions (pillar 3a)
Calculate the monthly costs for your own home quickly and easily using our mortgage calculator.
Save taxes with my condominium?
As a mortgage borrower your tax status changes as follows:
Renovations: Generally all value-conserving measures done to your real estate is tax deductible. Tax authorities differentiate between value-enhancing and value-conserving renovation work.
Replacement costs on condominiums, like doors or windows and electrical appliances like washing machines, are tax deductible. In addition, let's say you are renovating your bathroom from the 60's, the tax authority will definitely classify this as a value-conserving measure, which is also tax deductible.
Value-enhancing upgrades on the other hand (renovations that increase quality of living) are not tax deductible (e.g. upgrading the bathroom with a luxury shower).
Recommendation: Instead of doing all the renovations in one year, distribute the work over several years. This way you can save taxes, and enjoy the steady progress.
Additional deductions: As a house or apartment owner you can deduct debt interest from your income. Insurance premiums that have been concluded for apartment ownership can also be deducted, e.g. property insurance, household goods insurance. The same applies to energy-efficient measures, like insulating the roof or the facade.
Difference between floor ownership and condominium ownership
The two terms are often falsely used as synonyms. There is however, a major difference: When purchasing floor ownership you do not purchase an apartment, you purchase a share of the entire property and of the building. There is entitlement to use common items (e.g. elevator, basement, playground), at the same time however, you are also bound to the community regulations. General aspects of the real estate cannot be changed without agreement from the other owners.
A condominium describes an apartment obtained through purchase only.
How expensive is a condominium?
When it comes to making the purchase, anyone who wants to fulfill their dream of having their own home should keep an eye on more than just the purchase price and the mortgage interest rate.
Additional costs: These depend greatly on the condition and age of the real estate. You should budget in between 0.7 and 1 percent for additional costs. It is better to anticipate higher additional costs to give yourself some financial leeway.
Management funds: Condominium owners will often open a common fund that is used to pay for repairs and maintenance work. Each condominium owner takes on a portion of the common costs.
Amortization: In your own interest alone you should reduce debts as time goes by, and achieve loan amortizations. Anticipate about 2 percent of the overall bank loan per year.
Renovations and refurbishments: Every apartment will show signs of aging, so schedule 0.3 percent of the building value for renovations and refurbishments.
To be specific, expenses for the real estate, including additional costs and amortizations, should not exceed a third of your gross income.
Where to look for a condominium?
Die Suche nach dem passenden Eigenheim beginnt meistens im Internet. Auf verschiedenen Immobilienplattformen werden von Maklern oder Privatpersonen eine Vielzahl an Wohnungen zum Verkauf angeboten. Diese lassen sich nach unterschiedlichen Kriterien wie Preis, Anzahl Zimmer, Wohnfläche, Kanton/Stadt/Gemeinde/Region, Preis, etc. filtern, was die Suche deutlich vereinfacht.
Find a selection from homegate.ch below:
- Purchasing a home in Zürich
- Purchasing a home in Basel
- Purchasing a home in Geneva
- Purchasing a home in Lucerne
- Purchasing a home in Lugano
Take your time
Buying your own home is a big investment. Don't put yourself under any time constraints when buying a home - a mortgage is probably the biggest loan that you will have in your life.
Setting up a detailed household budget is recommended. Based on this budget and the costs that need to be budgeted for loans, additional costs and the house, you will quickly see whether it is financially possible to purchase your own home - or whether renting a home makes more sense at the moment.