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In total, we have withdrawn the following: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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Thanks for the interesting article. This is helpful to understand.
I see you withdrew part of your second and third pillar. Did you consider pledging it instead?
I thought about it, but in the end decided against it. It would have increased my debt and interest payments. And my second pillar is not great, so I’d rather keep the money to invest in my portfolio. And the money in my third pillar was not much, so pledging would not have made much difference.
Baptiste,
I think I’ve seen in one of your comments (but the website is having a very weird behavior in which the number of comments to this article vary greatly :-( that you’ll want to move to Saron as your next mortgage option and I’ve read this article saying that some fixed term mortgage providers will no longer have a cancellation penalty hence making Saron less attractive…
I put the French version here https://fr.comparis.ch/hypotheken/hypothekarzinsen/hypobarometer?utm_source=promo&utm_medium=email&utm_campaign=cnl01-22&utm_content=fr_bavo&encoded_email=cGVkcm8ucGFpdmFAYTMuZXBmbC5jaA%3D%3D
as the English one is NOT saying exactly the same thing :-(
Hope this helps!
Hello,
Thanks for all those articles,
I am not sure it is relevant but did you consider the impact of owning your house with regards to the wealth tax ?
br
Hi Patrick,
I am not considering that in this particular article.
But in general, we considered that indeed. The fiscal value (the one in our tax declaration) is lower than the real value of the house and even lower than the mortgage. So we ended up last year with a negative net worth for the wealth tax. And this will also reduce our wealth tax this year.
You’re completely right in neglecting the opportunity cost of not having your deposit invested in the stock market because… it would hurt too much ;)
Haha :)
I am not really neglecting it, we thought about it when buying. And when doing the full comparison (buying vs renting article), it definitely matters and can make renting win.
But in this article, I wanted to only outline the fees I am paying
If the probability of getting a divorce is high, then (regardless of what you save) never buy a house!
It’s true that houses are often a big issue in divorces.
Be positive!
Hi,
Your calculation does take into account provisions for maintenance (for roof, kitchen, bathroom, …) ?
Hi,
These are not calculations, these are the actual cost we paid for one year. It does not account for anything that we did not pay, so no.
Ok, I understand the calculation better. For info, it is common to consider that a provision of 1% of the purchase value should be made each year to cover maintenance costs.
I completely agree Jean. And we definitely consider that in the long-term picture :)
It depends a lot on whether you bought it new or not!
If new that’s way too much although better be safe than sorry… i.e. you can save and not spend if not needed!
“Virtual rental income” – what on earth?!
Interesting to see the taxes at the three levels, and then to think how they could be so different somewhere else.
Thanks for the clear article, a great write up!
Virtual rental income is “valeur locative” in French. It’s pretty stupid indeed.
It might be better translated as hypothetical rental income.
In times when interest rates are high, this is supposed to offset some of the interest deduction for our friends at the tax department. With low interest rates it does become a liability.
For me, it’s virtual income since it’s income that is inexistent. It is also hypothetical, but I would have to rent my house for this income to be realized and you cannot rent your main residence. In my book, any tax on fake income is stupid.
Another tax that we have to pay is the “Impôt foncier”, for example in Vaud it’s 1.5% of the estimated value :
https://www.vd.ch/themes/etat-droit-finances/impots/impots-pour-les-individus/les-impots-les-differents-types-dimpots/impot-foncier/
We have one. But I have not received it for this year only for the 12 days of last year and I did not want to extrapolate it. It should account to about 700-800 CHF per year.
Thanks for sharing your figures Baptiste!
Don’t you have “Impôt Foncier” in your case?
On our side, in 2021 we’ve spent about 1’915 CHF/month all included (mortgage, telecoms, electricity, gas, water, insurances, local taxes, repairs and new washing machine, and improvements which can be new plants in the garden, etc.). By local taxes, I mean all “taxes” (in French) but not “impôts”. We’re a family of 4.
We’ve built your house in 2000 and have never made any mortgage repayment (we can currently repay up to 20% of it). Perhaps if the suppression of the “valeur locative” goes through, we’ll change our approach…
Hi Pedro,
We have one. But I have not received it for this year only for the 12 days of last year and I did not want to extrapolate it. It should account to about 700-800 CHF per year.
In my case, I only considered the fixed costs, maintenance and repairs can add up a significant amount but is highly varying.
I really hope the valeur locative goes away :)
Interesting article. At the end what matter most is what you do with the money have enough to buy but decide to rent and how much is your real estate value increasing if you buy.
Funnily enough your said: “When you own your house, you are replacing rent with mortgage interests.” I guess if you have a mortgage your are not really owning your house, the bank does and you own a debt to the bank.
Would be interesting to see if one person/couple have enough cash to buy the house in full, how much more/less it would cost than doing a mortgage. I don’t really like the idea of having a debt to a bank (or anyone) and I prefer much more paying tax that are used by the city, canton, country to bring me and everyone else some services than to just give money to the bank as interest.
Of course the main difference will be the opportunity cost, if you can invest the money instead of having it locked in the house, you will certainly have better return than what you don’t pay in interest unless, the interest rate goes back to more normal level, like 3 to 6% but then again you will have more deduction for the interest your pay (which might be debatable when the owner(s) would have enough wealth to buy full).
These days I have the feeling that most people that can afford a house and decide to buy one is because they want something that is too difficult to find in the rental market (nice house are difficult to find in rental or they are really overpriced for the value). Also the fact that you own make you more comfortable spending money to improve and make the house the way you really want it, which is more difficult if not impossible with a rental.
Hi eluc,
That’s a good point. Owners are not really owners :) The banks are owners. we only own 20% of our house and we pay rent to the bank.
The opportunity cost of buying a house fully in cash would entirely dwarf the interests you are going to save.
The advantage of real estate is that you do not have to buy it fully yourself.
And you are entirely right. In our cases, we simply could not rent any house in our village, there are none. So buying was the best option.
I’d say what is important is the freedom of doing what you want…
If we’ve made over the years 35% down payment (initial investment of 28% + all the subsequent investments) that represents around 50% of the market value of the house, so let’s say we’re half-owners but we get to decide what we do with the property not the insurance we have the mortgage with :-)