The cost of owning our house after a year
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Many people are wondering how much our house is costing us. But it was difficult to answer that question before we lived inside for a while.
After one year spent in our house, I want to summarize all the fees we have paid. I only compare what changed. For instance, we still pay about the same electricity as before, which does not change. But heating is different, and we have to pay for water, for instance.
Hopefully, this will be useful for people wondering how much it costs to live in an owned house.
One-Time Expenses
First, I want to cover one-time expenses. These are expenses related to the purchase of the house. We will not have to pay these expenses again unless we buy a new place.
Withdrawal taxes
The first expense we had to pay was the withdrawal taxes. We used part of our second pillar and part of our third pillar for the downpayment of the house.
In total, we have withdrawn the following:
- 50’000 CHF from our second pillar.
- 17’500 CHF from our third pillar.
When we withdraw money from retirement funds, we pay progressive taxes. It means that we pay a low tax rate for a low amount, and as the amount goes higher, so does the tax rate for the higher amounts.
As with everything in the tax system of Switzerland, we have to pay taxes at different levels. This system gets complicated very quickly. For our example, remember that we are married, and in the canton of Fribourg, the numbers will be different for each canton and marital status.
At the federal level, we paid 129.80 CHF. This tax was computed as a fee of 0.9615% of the total 67500 CHF. And we only have to pay 20% of that.
At the cantonal level, we paid 1’475 CHF. The first 5000 CHF is without taxes. The subsequent 40’000 CHF are taxed at 2%, and the following 22’500 CHF are taxed at 3%.
Finally, at the municipality level, we paid 1180 CHF. In our municipality, we pay 0.80 CHF for each 1 CHF taxed by the canton. So, 0.8 times 1’475 CHF is 1180 CHF.
We also paid a fee of 500 CHF for the withdrawal from our second pillar, AXA. This fee is outrageous, way too expensive. It is already a bad second pillar with very low returns and high fees.
So, in total, we paid 3284.80 CHF to withdraw money from our second and third pillars.
House Transfer Fees
The most significant bill, by far, we had to pay was the fee for the official property transfer. I do not understand how this can be so expensive. In my head, all they have to do is change the name on a few items on a computer.
In total, we paid 23’315 CHF for this bill. I still cannot believe that. This fee has two parts, some fixed fees and some proportional fees. By far, the most expensive part is the proportional fees.
For the proportional fees, we paid 1.5% of the house’s value to the canton. And then the same for the municipality. That’s 3% of the value of the house wasted. So, this part accounted for 21’450 CHF. And the rest is all the fixed fees.
Notary Fees
Another large one-time fee is the notary fee. For our house contract, we paid 3400 CHF for the notary. Considering the small amount of work involved, that is already a high fee. However, compared to the land register, this is fair.
Recurring fees
Now, I want to compare the regular living fees inside our owned house to renting our apartment. Regular fees represent the cost of living in our house that will pay for many years to come.
Some of the fees did not change at all. For instance, we still spend about 1200 CHF per year on electricity. We do not use more electricity in the new house, which is excellent. We pay about 400 CHF for water and sewage per year. This bill was included in the charges for the previous apartment and should be about the same.
Mortgage interests
When you own your house, you are replacing rent with mortgage interest. We currently pay 305.10 CHF per month for our mortgage. This amount is only the interest on our debt. Amortization is not an expense since it moves money from cash to real estate. Amortization is not lost and not changing our net worth.
These interests are really low. We are pretty happy about our 5-year mortgage conditions. Once it is finished, we will likely switch to a SARON mortgage. At this point, our interest rate will likely increase.
Over the years, this amount of interest will slightly go down since we do about half of the amortization directly. So each year, our debt decreases slightly, and we pay lower interest.
If you want to learn more, I have an entire article about mortgages in Switzerland.
House insurance
When you rent, you must pay the insurance for objects inside the apartment and civil responsibility. When you own, you still have to pay these two insurances, but you have two extra insurances.
First, you must pay the cantonal building insurance (ECAB in the canton of Fribourg). This building insurance is at the cantonal level, so you do not have to choose which one you use. For this, I pay 312.65 per year.
This first building insurance is optional in some cantons. But since this protects against destroying your house with fire or natural damage, it probably makes sense to keep it.
And we also pay second building insurance for what the cantonal insurance does not cover (windows and things outside of the house). For this, I pay 420.80 CHF.
So, in total, we pay 733.45 CHF per year or 61.12 CHF per month extra by owning our house.
Heating
Currently, we pay about 200 CHF per month for heating. However, this is likely to change next year. We are expecting lower than 150 CHF per month.
The reason is that most of our heating bill is still based on the consumption of the previous owner, that seemed to be using the heating system quite heavily. So, the bill should be lower once we learn to use the heating system better.
Nevertheless, this is significantly more than we paid before (about 50 CHF per month). But we have a much higher volume of heat.
So, at this point, we pay about 150 CHF more monthly to heat our house than for our apartment.
Taxes
Most people believe that when owning, you pay fewer taxes. But this is incorrect, at least not right now, and not for most people.
When you own, you can deduct your interest payments from your taxable income. So, this will reduce your taxes. In my case, I can deduct 305.10 CHF per month.
However, you must also add a virtual rental income to your taxes. In our case, the tax office evaluated this rental income at 1217 CHF per month. So, this gets added to my taxable income.
So, in total, I have 911.90 CHF extra virtual income per month with the house. With our marginal tax rate of about 40%, I pay 364.76 CHF in additional monthly taxes because of the house.
In the past, this was often different because interest rates were much higher, so you could deduct more money than the rental value.
On top of that, you also need to pay for the property tax. This fee is a percentage of your house value. This percentage depends on your canton. In our case, we pay 0.2% of the taxable value of our house per year. So, we must pay 720 CHF per year extra. This is 60 CHF per month more.
Renting vs Owning
So, with this, we can do a quick summary of buying vs renting in our case.
This table compares with our previous apartment:
| Rented Apartment | Owned House | |
|---|---|---|
| Rent | 1360 | 0 |
| Heating | 0 | 150 |
| Taxes | 0 | 424.76 |
| Mortgage | 0 | 305.10 |
| Insurance | 30 | 91.12 |
| Power | 100 | 100 |
| Total | 1490 | 1070.98 |
In total, we save 419.92 CHF per month by owning our house!
Does that mean that renting is necessarily worse than owning? No! This summary only takes into account the direct costs of each option. But in practice, we also need to consider the opportunity cost of the downpayment amount. And, we should not forget maintenance fees that can weigh a lot in the balance.
Also, renting a house in our neighborhood would cost about 2500 CHF. And there are almost no such assets on the market (one of the reasons we bought it in the first place).
Again, this is only what we directly paid for a year!
If you want to see the whole picture, you can see my article about buying vs renting in Switzerland.
Conclusion
This article should give you a good summary of what you can expect to pay for owning a house for an entire year. In practice, this will be different for each household since each house and apartment is different.
Again, this is insufficient to say whether we should buy or rent. The goal was to share the numbers we now have after one year so that people get an idea of what they can expect if they buy a house or apartment.
Overall, we believe we had a good deal with this house. It is not an excellent investment for returns, but it will save us money in the long term. And anyway, we are happy in our house, which is what matters in the end!
If you want to learn more about owning a property, I have a guide on buying a house or apartment in Switzerland.
What about you? How much are you paying for your house per year?
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Dear the PoorSwiss,
Could you explain about the required 10% downpayment in cash. It seems that, you need to withdraw both Pillar2 and Pillar3a to have enough that 10% in the article? I thought 10% cash should be from our pocket/Pillar3a, and cannot be from Pillar 2.
– 50’000 CHF from our second pillar.
– 17’500 CHF from our third pillar.
How about the other 10% downpayment (to have 20% in total), did you do a pledge with Pillar2 ?
In the end, how much borrowing ratio(Loan to Value) LTV you could get from the bank ?
Thanks alot.
Ben
Hi Ben,
Yes, we had a cash withdrawal as well. As mentioned in the article, I am only reporting the direct costs (as in a bill). So a cash withdrawal does not trigger any withdrawal taxes, so it was not in this list.
We did a classic 80% / 20% mortgage.
Hi, Baptiste!
Doesn’t debt for financing the house reduce the wealth and therefore tax in wealth?
Regards,
Fulai
Hi Fulai
Yes, it will likely reduce your taxable wealth and wealth tax. However, the imputed rental income will increase your income taxes much more significantly.
Thank you so much. In one of your earlier writings, you mentioned that, if some parts of our apartments are under-utilized, we could claim reductions in taxes. But where in the tax filing could we find that section where we can indicate under-utilized space?
Hi Fulai
There is no clear way of doing that. This is due at the federal level, and about half of the cantons also accept such reductions.
If you want to do that, you will need to contact the tax office to request an update on the imputed rental value. They have a form to fill out, and I think you can fill out the underutilization form there. Keep in mind that you will have to prove it. In most cases, this room should be entirely empty.
Buying a house with mortgage doesn’t change anything in terms of wealth tax. You need to claim the worth of the house as wealth and mortgage as debt so your net wealth and taxes on it would be the same.
This is not entirely accurate. The price of the house you are paying and the taxable value of the house are two different things. For instance, our taxable value is twice lower than the price we paid. As a result, our mortgage is higher than the value and so we are reducing our taxable wealth with our house.
Hello
I always like your transparency and w us readers to get an understanding of the matter. Thank you.
I cannot follow the comparison of rents: If renting a house in your neighbourhood costs 2500, why do you think you can own one at 1000? A) it would mean that there is a huge investment opportunity to be harvested or B) there are costs that are not listed as you say yourself. These must be quite a bit higher. Maybe worth an article? ;-)
Another thing that makes me smile in your articles and some of the comments: the complaint about things being complicated in Switzerland. I see it the other way around. Paying taxes at different levels makes it far more transparent how you are paying. One tax payment increases the governmental greed to extract more as there is no clarity anymore. A federal system wants these checks and balances at the lowest level possible as it tries to limit the central power…
Hi Eon
The final summary only takes into account the direct costs (no opportunity cost and no amortized one time costs). All the costs have been listed, but only the recurring fees are taken into account as mentioned in the comparison.
Now, I do think that when interest rates are low, there is a nice opportunity to buy. The reason why many people do not buy is because they cannot save for down payment and cannot afford the mortgage (with hugely inflated house prices) with a 5% theoretical interest rate.
Hi Baptist,
I just want to Say thank you very much again for sharing all these detailed information, these info help a Lot to take the right decision. They are like gold for a lot of people living in Switzerland.
We Really appreciate and admire your work man!
Best regards
Emanuele
Thanks for your kind words Emanuele!
I am happy you find my work useful!
Hi Baptiste,
Very useful article, thank you!
We are also in the process of buying a house in Canton Aargau. We were wondering if the following section is usually included in notary contracts in Switzerland:
“A mortgage debt is not assumed by the buyer.
The buyer takes over the unencumbered mortgage note (CHF X). In addition to the aforemen-
tioned purchase price, the buyer shall pay the land register and notarial costs incurred in connection with
the creation of this mortgage note. This amount will be invoiced separately to the buyer by the vendor
after entry of this deed in the land registry (payment deadline: 20 days after invoicing).”
Is it common in Switzerland for the buyer to pay for the mortgage note creation?
Your reply and insight would be much appreciated!
All the best,
Viktória
Hi Viktoria
Yes, it’s common. We paid notarial costs and land register costs when we bought our house.
Hi Baptiste,
Thanks a lot for your reply!
I knew about the notary and land register costs but did not know that a mortgage note creation is also needed and paid by the buyer.
I guess the mortgage note is important for the buyer to prove that he/she is taking over a debt free property and there are no surprises or hidden costs?
All the best,
Viktória
Hi,
Thanks for the article, it was useful to see all the costs related to owning a house together. I think there is a mistake in your comparison table. When you calculate the taxes for your house, you add the yearly property tax of CHF 720 to the monthly income tax of CHF 364.76. Don’t you need to divide the former by 12 or am I missing something?
I also wanted to ask what is the interest rate of your mortgage and what was the downpayment (in%) since your monthly interest rate payment is very low.
Hi Hur,
Good catch! This is a stupid mistake on my end, will address shortly.
Our mortgage is at 0.64% and we did a standard 20% downpayment.
Thanks for the information. When I saw ~300 monthly payments I thought your downpayment was larger but 0.64% interest rate explains it!
Yeah, we did it at a very good time. Currently, the same loan is 4 times more, so this will change next year when we renew.
So even if your mortgage rate triples when you remortgage it’s still considerably cheaper than renting at 2500.
Taxes are crazy. I paid under 10k tax for a 8 room house in AG (rental value approx 3000-3500)
If my mortgage triples, with everything included, it won’t be considerably cheaper than renting, but it should slightly cheaper indeed.
Hi Baptiste, another very good article, thanks. I’m only missing two things here, I don’t see the property tax (impôt foncier) and water/sewage charges.
I was wondering maybe you don’t have property tax in FR but here in VD these are actually two of the biggest charges relative to our house (each ~1000 CHF per year).
We also have garbage collection fee at 100 CHF per adult per year, but that’s a less important amount.
Hi Tamas,
When I wrote this article, after one year of having our house, we did not yet pay property taxes. But I will add it because it’s important indeed! For us, it’s 720 CHF per yera.
I don’t really want to include water/sewage since this is something you also pay when renting, but indirectly through the charges. Same for garbage, you pay it regardless. I will try to make it clear in the article what I include!
Thanks for pointing this out!
Hi,
Exactly, you pay these fees indirectly when renting, that’s why I thought they should be in the calculation. If you don’t own the house you don’t pay these directly. It’s the same as for the heating: while you rent, it’s included in the charges.
:)
Hi
Is there a reason why you are doing direct amortization? Wouldn’t that increase your taxes next years as the deductions would go down?
Hi Anna,
Yes, the deductions will go down, but so will the payments.
My main issue with indirect amortization is that it forces us to invest in crappy investments such as life insurance 3a. Since I want to get rid of my life insurance 3a, I will soon switch to entirely direct amortization (currently about 50/50).
Why do say that life insurance 3a is not a good thing?
Because they are much inferior to a good 3a and sometimes even worse than a bank.
I have talked about this in detail: The Trap of Life Insurance Third Pillar
Hello Mr Poor Swiss,
Thank you for the article, I own an appartment and try to figure out which insurance I should pay.
1. Could you explain a big about the cantonal building insurance please, you said this is mandatory, how do you know how pay this? Were there bills from the company sent to your home?
2. Could you explain about the second insurance (for the kitchen), what is the name of this insurance and what do they cover? Is this insurance mandatory as well?
Thank you for your answer
Hi,
1) They will contact you directly and send you the bills. The name of the company is probably different from one canton to another. The most important point about this insurance is that it protects in case of fire. But it protects only the house, not what is inside.
2) Reading again about it, it’s actually not about the kitchen. It’s about smaller things that the main cantonal insurance does not insurance. I will need to update this part of the article. It’s not mandatory. In our case, it protects our windows for instance and the things we have around the house.
Regarding the first insurance, it’s actually not mandatory in every canton (source).
Hi Baptiste,
This is a really great article, thank you! What I would really love to see is a breakdown of your costs, or the entire debate over renting vs buying, using similar criteria as those described in this video: https://www.youtube.com/watch?v=Uwl3-jBNEd4
I am about to move to Switzerland and have started thinking about buying a home, and have been thinking of doing that comparison according to the video myself, but I find it a bit hard given the numerous laws, and taxes, and differences between cantons (I’m looking at Zurich for now – yeah! I know).
Hi Andrei,
The goal of this article was to cover the direct costs of owning our house after one year, as a reference. It’s not meant as a buy vs rent article. I have another article that covers this: Should you buy or rent a house in Switzerland?
It looks to me like the only thing missing in this article is the opportunity cost, no? In our case, it shoul add about 600 CHF per month.
Hi Mr Poor Swiss,
It was with great interest that I read this article about your house purchase, in this case with the Swiss perspective. I also bought a house last year and the expenses are outrageous like the ones related with the property transfer. You really need to be “rich” to buy a house…
In Portugal we have a lot of direct and indirect taxes not only when you buy the house but also every year. It’s the premium you have to pay for the “luxury” of having your own house… But In Switzerland taxes are really complicated, you have to be some kind of an expert to deal with it all or have someone to help you.
Your house insurances are crazy! 733 CHF per year is a lot just for something that is more for peace of mind and that we never want to use.
I see that your consider your house in the net worth value. Do you use this NW value to calculate your FI number? In my case I prefer not to consider the house in my NW and keep things simpler maybe because I’m not calculating my FI time since I’m not really concerned. If FI arrives I will know it for sure. :)
All the best,
Luis Sismeiro
Hi,
It’s indeed complicated and expensive to deal with this. I wish they would be simplifying and especially unifying between cantons.
Actually, I don’t mind some of the insurance on the house. If there is a fire or something like this, the damage can be huge. It’s cheap insurance for this kind of cover.
No, I have a second net worth number, my FI Net Worth. And I use this number of my FI ratio. Excellent question! And indeed, my house value does nothing for our FI net worth and FI ratio.
Thanks for sharing, Luis!