14. November 2019

Why is buying a home convenient? Comparison between lease and mortgage loan

Low interest rates accentuate the differences between tenants and homeowners in favor of the latter. Becoming a homeowner would make save 6’000 Swiss Francs a year.

According to a study by Money Park, with the help of the real estate agency AlaCasa, published in September 2016, homeowners save on average 6,000 Swiss Francs a year. The study states that a tenant pays on average CHF 2,000 per month for his home, compared to 1,500 for an owner: therefore the difference rises to CHF 6’000 over one year. Furthermore, the difference would be even more pronounced for single-family homes, in which tenants pay on average CHF 2300 and the owners 1450. More than 900 people were examined to reach this conclusion.
Although three years have passed since the publication of this study, it can still be said that today living in lease in Switzerland is more expensive than in a house owned. But why?

Interest rates at historic lows
In the initial analysis the main cause of the savings is due to the low interest rates on mortgage loans that the banks stipulate with the buyers. As can be seen from the graph below, the interest rates on mortgage loans are at historic lows and are around 1% for fixed rate loans. This encourages Swiss households to realize their dream of buying a home, as well as encouraging potential investors in the real estate market.

Tax advantages
In addition to having advantages on housing spending, buying a home also offers tax advantages.
In the Swiss tax declaration, each tax subject, after having declared their income and their overall substance, is entitled to deductions that reduce the taxable income and substance. These deductions allow you to pay less federal, cantonal and municipal taxes.

Regarding the income tax, it is possible to deduct in the tax declaration the passive interests of the mortgage loan. Unlike a rented home economy, homeowners have this tax advantage.
It is also possible to have another deduction on the possessions, as it is possible to scale from the substance all the types of debts, which in this case they concern the mortgage loans.

In conclusion, it is fair to say that buying a home requires a large investment of money and good sustainability to guarantee the bank, however, becoming an owner allows you to have many advantages, managing to save more money than those who live in rent.