What is the first mortgage
1st and 2nd mortgage
The terms 1st mortgage and 2nd mortgage are often used in real estate financing. However, the terms have lost their meaning in practice in recent years, as more and more lenders are calculating with the customer with a single mortgage.
When buying a property, the total amount of the purchase is usually made up of your own funds and a mortgage. As a rule, own funds must amount to at least 20 percent of the purchase price. With a property price of 1 million francs, 200,000 equity are required. At least 10 percent of the purchase price must represent so-called hard equity. Hard equity is all of your own funds, except those from the second pillar (pension fund). Even capital that is claimed by pledging the pension fund is not considered hard equity. In most cases, a maximum of 80% of the property value is mortgaged for owner-occupied properties.
1st and 2nd mortgage
Banks allow a 1st mortgage up to an amount that does not exceed two thirds of the property value estimated by the lender. A limit of 60% also applies to individual lenders. Lenders usually talk about the 1st mortgage long term. If it is affordable, the 1st mortgage can also be retained after retirement.
The second mortgage is used to finance amounts that exceed the first mortgage. The second mortgage usually has to be amortized over a certain period of time. Usually for 15 years or until retirement. The second mortgage means a slightly greater risk of loss for the lender because in the event of a forced sale, the first mortgage is repaid first. This is also the reason why the interest rate on the 2nd mortgage is higher than on the first mortgage.
Interest rate amount
With standard financing (low loan-to-value ratio, low total housing costs compared to income and a standard property), the interest rate is usually decisive. Financing is possible with most providers. In many cases, insurance companies, pension funds and other institutional investors can also be considered for financing. Depending on the location of the property and the financing structure, the interest rates vary greatly from provider to provider. In the case of tight financing or special financing requirements, the interest rate is often not the most important criterion. Special financing can arise if banks are usually the right address for special financing requests.
Mortgage is higher than the 1st mortgage.
A calculation example for a "typical" real estate financing can be found here:Mortgage amount - sample calculation of real estate purchase
The fifth equity can come from various sources. The most common are the following:
- Real estate buyer's cash and cash equivalents
- Pillar 3a
- Inheritance withdrawals
- Private loans (e.g. within the family)
- Pension fund (maximum 10% of the market value)
- Own work by the real estate buyer
- Building land
Not all of the own funds may come from the second pillar (WEF purchase or pledging). At least 10 percent of the own funds must represent hard own funds. You'll find more about it here:Purchase of pension fund for property
You can find more information on this topic here:Factors for determining the amount of the mortgageIndividual contributions when buying a propertyMortgage amount and taxesMortgage in old age
Calculator on the subject:Calculator - Buy Property, Portability
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