What is a mortgage? What are the advantages and disadvantages?
Definition of a mortgage
A mortgage is a long-term loan used to finance the purchase of a property to become a homeowner. This type of loan is usually granted by a financial institution, such as a bank, using the property as collateral.
The benefits of a mortgage
- Borrowers can choose between a short-term or long-term rate (usually up to 10 years), allowing them to tailor their budget as closely as possible.
- Mortgage interest can be deducted from Swiss income tax, reducing the tax burden on borrowers.
The disadvantages of a mortgage
- If the mortgage loan is not repaid, the pledgee can seize the property to repay the debt.
- In the event of devaluation of the property, borrowers may find themselves with insufficient collateral, which means that the property's value no longer covers the loan amount.
Lombard Loan: an alternative to mortgage loans
A Lombard loan is financing the total or partial purchase of a property in Switzerland. This is a loan where the lender uses the borrower's assets under management, such as shares, bonds, or investment funds, as collateral while keeping their investment portfolio intact.
The funds made available can then be used to buy a property.
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