Go to overview of tax saving tips
Since June 1, 2012, banks may require an amortisation of up to 2/3 of the value of a property within 20 years.
Direct amortisation means that you pay back the mortgage in instalments and thereby gradually reduce your debts. This can make sense, but has a large disadvantage: the mortgage amount becomes smaller – thereby the interest on debt is also reduced which can be deducted from taxes. The tax invoice therefore increases continuously. However, this is currently not severe: the level of interest rates is currently so low that the tax saving effect due to the mortgage is rather low.
It is usually only the second mortgage that is amortised (for example over 20 years or 1% of the total mortgage per year). The first mortgage is usually not paid back.
Indirect amortisation can make sense from a fiscal point of view. You thereby pay the money into Pillar 3a. The assets are bonded in the favour of the bank and thereby serve as additional guarantee. The assets are paid out latest at your retirement and have to be used for the payback of the mortgage. Your advantage is that you can deduct the payment into Pillar 3a – which will be CHF 6,739.- for employees this year – from taxes.
It depends on your personal situation if you want to amortise your mortgage or not. The following questions are important: What will you do with the money if you do not amortise the mortgage? Do you want to invest it? Would the return after tax be higher in the long-run than the savings due to a smaller mortgage? Or do you need the money for consumption expenditure? Keep in mind that capital used for amortisation is bound to the property and cannot be used for consumption.
