Affordability in Old Age: Strategies for Retirement

Strategic Reduction of Mortgage before Retirement

As income decreases in old age but the calculated costs remain unchanged, lenders usually require the mortgage to be reduced to 65% of the market value. This limit serves as a guideline to keep the financial burden for retirees manageable. In cases where retirement income is particularly low, an even lower loan-to-value may be necessary to meet banks' regulatory requirements.

Early Analysis of Retirement Financing

Forward-looking calculation of future AHV and pension fund benefits enables a precise comparison with the calculated costs of the property. Through this juxtaposition, necessary amortization steps can be defined years before retirement. Solid planning ensures that recurring fixed costs are minimized during retirement and that no unforeseen funding gaps arise.

Optimizing Mortgage Terms in Retirement

Choosing mortgage terms in old age requires weighing planning security against flexibility. Since factors such as a possible sale or transfer of the property to heirs gain importance, shorter terms offer greater flexibility. However, if it is certain that the mortgage will be taken over by the next generation within the family, long-term commitments may still make sense due to attractive interest rates.

Comparison of Bank-Specific Affordability Criteria

Assessment of affordability in old age is not standardized in the Swiss market. While many providers strictly adhere to the one-third rule, more flexible lenders accept housing cost shares of 35% to 40% of income. There is also room for negotiation with the notional interest rates and maintenance allowances; therefore, a comprehensive comparison of different providers increases the chances of successful refinancing.

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