How It Works

Overview of the Comparison

The calculator simulates two parallel scenarios over your chosen time period, both starting with the same initial capital:

• You purchase a property with a mortgage. Your net worth grows through property equity (as you pay down debt and the property appreciates) plus investments from monthly budget surplus.:
• You invest your initial capital and continue investing any monthly budget surplus. Your net worth grows through investment returns.:

Both scenarios use a monthly budget to ensure fair comparison. Any money left over after paying housing costs (whether buying or renting) is automatically invested and compounds over time at your specified investment return rate.

Initial Investment (Year 0)

Down Payment

In Switzerland, you need a minimum down payment of 20% of the property price. At least 10% must come from your own equity (not from your pension fund). Our calculator uses your specified down payment percentage (default: 20%).

Notary and Registration Fees

When buying property in Switzerland, you pay one-time fees for notary services, land registry, and sometimes transfer taxes. These typically range from 1-3% of the purchase price, depending on the canton (default: 1.5%).

Total Initial Investment

In the renting scenario, this same initial investment amount is immediately invested in your portfolio, ensuring a fair comparison where both scenarios start with the same capital deployment.:

Swiss Mortgage Structure

Two-Tier Mortgage System

Switzerland uses a unique two-tier mortgage structure:

First Mortgage (up to 65% LTV)

• Covers up to 65% of the property value (Loan-to-Value ratio)
• Typically has a lower interest rate (default: 1.5%)
• No mandatory amortization required (though you can optionally pay it down)
• Can remain outstanding for the entire mortgage term

Second Mortgage (65-80% LTV)

• Covers the portion between 65% and 80% LTV
• Usually has a higher interest rate than the first mortgage (default: 2.5%)
• Must be amortized within 15 years (or by retirement age, whichever comes first)
• Creates a forced savings mechanism through mandatory debt repayment

Monthly Budget System

The calculator uses a monthly budget to ensure fair comparison between scenarios. You specify:

• Your total monthly allocation for housing and investments (default: CHF 3,000)
• Annual increase in your budget, typically matching salary growth (default: 2%)

Each month, after paying housing costs, any surplus is automatically invested:

This surplus is invested and grows at your specified investment return rate (default: 5%). This applies to both scenarios, meaning buying isn't penalized for lower housing costs - any savings are automatically reinvested.

Annual Costs for Buying

Mortgage Interest

Each year, you pay interest on both mortgages based on their outstanding balances:

Amortization (Principal Repayment)

The second mortgage must be paid down over time. After the second mortgage is fully paid, you can optionally amortize the first mortgage:

Maintenance Costs

Property ownership requires ongoing maintenance. The standard rule of thumb in Switzerland is 1% of the property value annually:

Property Taxes

Property tax rates vary by canton, typically ranging from 0.1% to 0.5% or more (default: 0.2%):

Tax Benefits

In Switzerland, mortgage interest is tax-deductible:

Total Annual Buying Cost

Property Value Appreciation

The property value grows each year at your specified appreciation rate (default: 2%):

Historical data for Swiss real estate shows appreciation rates typically between 1.5% and 3% annually.

Net Worth Calculation (Buying Scenario)

Your net worth when buying consists of two components:

1. Property Equity

Your equity grows through mortgage amortization and property appreciation:

Selling costs (default: 2.5%) are deducted to give you the realistic net equity if you were to sell.

2. Investment Portfolio

Any monthly budget surplus (budget minus housing costs) is invested and grows at your investment return rate:

Total Net Worth (Buying)

Annual Costs for Renting

Monthly Rent

Your annual rental cost is simply your monthly rent multiplied by 12:

Rent Increases

Rent increases over time, though Switzerland has relatively controlled increases (default: 2%):

Net Worth Calculation (Renting Scenario)

In the renting scenario, your entire net worth comes from your investment portfolio:

Initial Investment

You start with the same initial investment (down payment + notary fees) that would have gone into buying. This is immediately invested in your portfolio.

Monthly Surplus Investments

Each month, after paying rent, any budget surplus is invested:

Total Net Worth (Renting)

Key Comparison Insights

Early Years

Renting often has an advantage early on because:

• Large initial investment is tied up in property (down payment + notary fees)
• Buying costs (interest, maintenance, property tax) typically exceed rent initially
• Renting scenarios have more cash available for investment (larger monthly surplus)

Later Years

Buying often pulls ahead over time because:

• Mortgage debt decreases through amortization, building equity
• Property appreciation compounds over time
• After second mortgage is paid off, monthly costs drop significantly
• Rent continues to increase while fixed mortgage interest becomes relatively cheaper
• Tax benefits on mortgage interest reduce effective borrowing costs

Budget Constraint

The calculator enforces budget constraints to ensure realistic scenarios:

• If monthly costs exceed your monthly budget in any year, results are not shown
• This prevents unrealistic scenarios where you couldn't actually afford the housing costs
• Budget grows annually at your specified rate (typically matching salary growth)

Important Assumptions

What's Included

• Swiss two-tier mortgage structure and regulations
• Tax deductibility of mortgage interest
• Mandatory second mortgage amortization
• Property maintenance costs and property taxes
• Rent increases and property appreciation
• Investment returns on initial capital and budget surplus
• Monthly budget constraints with growth over time
• Selling costs when calculating net equity

What's Simplified

• Mortgage rates assumed constant (in reality, they change at renewal)
• Property appreciation assumed steady (actual markets fluctuate)
• Investment returns assumed constant (actual returns vary)
• Tax situation simplified to a single marginal rate
• No consideration for one-time renovations beyond routine maintenance
• Capital gains tax not included (currently not applicable in Switzerland for primary residences)

How to Use This Calculator

Sensitivity Analysis

Test different scenarios by adjusting the parameters:

• This heavily influences the renting scenario: This heavily influences the renting scenario
• Test conservative (1%) vs optimistic (3%) scenarios: Test conservative (1%) vs optimistic (3%) scenarios
• See how rate changes affect the comparison: See how rate changes affect the comparison
• Buying typically looks better over longer periods: Buying typically looks better over longer periods
• Higher budgets create more investment surplus: Higher budgets create more investment surplus
• Models your expected salary/income growth: Models your expected salary/income growth

Personal Factors Beyond Numbers

• Do you value stability or flexibility?: Do you value stability or flexibility?
• How likely are you to relocate?: How likely are you to relocate?
• Are you comfortable with leverage and market fluctuations?: Are you comfortable with leverage and market fluctuations?
• Do you want to customize and renovate?: Do you want to customize and renovate?
• Property ownership requires time and attention: Property ownership requires time and attention

Disclaimer

This calculator provides estimates for educational purposes only and should not be considered financial advice. Key limitations:

• Real estate and investment markets are unpredictable
• Your personal financial situation and goals are unique
• Interest rates, regulations, and economic conditions change
• Unforeseen events can dramatically affect outcomes

Always consult with qualified financial, tax, and legal advisors before making major financial decisions.