Housing in Switzerland: Rent or Buy?

Most long-term Swiss residents begin pondering this question at some point in time. Is it worth it to buy your own home, or is paying rent a better financial decision?

The question is not always easy to answer, and the right choice depends on a number of factors.

All of the costs connected to buying a house need to be compared to the cost of renting the same home.

These are the primary costs of buying a home:

• Annual mortgage interest payments: The current base mortgage rates can serve as a guideline for calculating what you can expect to pay for your mortgage.
• Annual supplementary costs: These include various costs including heating, electricity, water, buildings insurance premiums and caretakers’ fees, plus possible administrative costs.
• Annual maintenance costs (for repairs and renovations).
• Possible costs resulting from an amortization.
• One-off taxes, duties and fees, such as notary fees, property transfer taxes and land registry fees.

A home rental, on the other hand, involves these costs:

• Net rent: The base rent you pay for a property.
• Supplementary rental costs: These may include caretaker fees, utilities and heating.
• Other possible rental costs, such as rental deposit insurance.

When mortgage rates are low due to a general low-interest environment, it’s important to consider that rates will likely climb in the future. If you choose to buy your house or apartment, you will need to be able to afford to make higher interest payments in the future.

Mortgage interest charges represent a major part of the cost of buying a home. That’s why it is important that you compare the guide rates of different lenders. In relation to the current low mortgage rates, the other costs of buying a home have become more prominent.

Use the comprehensive Rent or Buy Calculator to calculate the full cost of a home purchase, taking all costs into account. Tax advantages or disadvantages and possible increases or decreases in the property’s value are also included in the equation.

The pros of renting a home:

• More flexibility: If you prefer not to be tied down, and can picture yourself relocating for personal or professional reasons within the next few years, a rental will likely be a better fit for your lifestyle. Opting out of a home rental comes with a lot fewer hassles than trying to get a mortgage off your hands.
• Less admin work: Being the proud owner of your own home also makes you the busy administrator of the paperwork flood that’s sure to hit the minute you sign for your home. Even small repairs and administrative tasks will normally have to be taken care of by you. As a renter you can enjoy living in a home without becoming a part-time property manager.
• Less responsibility: Owning a home demands a lot more responsibility than a simple rental contract. If you take out a mortgage to buy your home, you will have the responsibility of repaying a huge debt. That level of responsibility may well be a new experience for you, and you will want to be sure you are ready before you take that step.
• No major investment required: As opposed to buying a home, which requires a large down-payment, renting does not require you to spend a large portion of your assets. If you have savings, you may earn larger returns through other investment vehicles compared to investing in property through a mortgage.

The pros of buying a home:

• Lower costs: Buying a home may work out cheaper than renting the same home, so you may get more living for your money. But that isn’t a given, and will depend on a lot of factors including the mortgage rate environment, the size of your mortgage and the condition of the property.
• A better investment: Your own home provides you with a long-term investment and a safeguard against inflation. As with all investments though, property investment does come with a certain amount of risk.
• A better quality of life: Ideally, owning your own home may bring improvements to your overall quality of life. You have the freedom to adapt your own four walls to match your imagination (within the confines of property codes, of course). And best of all, you don’t have to be bothered with a landlord, or worry about when they may choose to end your rental agreement.
• Possible tax savings: Another benefit of buying a home is that you may save on taxes. However, that will not be the case with every mortgage. Whether or not you save on taxes will depend on several factors including the banks equity in your home (the loan-to-value ratio). The more you owe on your home, the larger the income tax deductions you may be eligible for. Just consider that more debt also means higher interest payments. The moneyland.ch Rent or Buy Calculator accounts for possible tax benefits to help you understand whether or not buying a home can help you save on taxes.

More on this topic:
Rent or buy: The home cost calculator from moneyland.ch
Swiss mortgage offers compared