Rent or Buy?

The costs of home ownership go far beyond mortgage interest. Additional costs include: - Maintenance and renovations: Rule of thumb 1% of property value per year - Imputed rental value taxation: The fictitious rental value is taxed as income (Art. 21 para. 1 lit. b DBG) - Purchase costs: Notary, land registry, property transfer tax -- typically 3-5% of the purchase price - 2nd mortgage amortisation: Must be repaid within 15 years or by age 65 - Opportunity costs: The tied-up equity (min. 20%) cannot be invested elsewhere All these costs are taken into account in this calculation.

The imputed rental value is a fictitious income that homeowners must declare for tax (Art. 21 para. 1 lit. b DBG). It typically corresponds to 60-70% of the market rent for a comparable property. In return, owners may deduct mortgage interest (Art. 33 para. 1 lit. a DBG) and property maintenance costs (Art. 32 para. 2 DBG). With a high mortgage burden, the deductions often exceed the imputed rental value -- a tax advantage over renters. The abolition of the imputed rental value has been discussed politically for years. The Council of States approved a reform in 2023, but it has not yet entered into force.

Swiss homeowners benefit from three key tax deductions: 1. Mortgage interest deduction (Art. 33 para. 1 lit. a DBG): All mortgage interest can be deducted from taxable income -- the biggest tax advantage for homeowners. 2. Property maintenance (Art. 32 para. 2 DBG): Actual maintenance costs or a flat-rate deduction (10-20% of the imputed rental value depending on the canton) can be claimed. 3. Indirect amortisation via pillar 3a: Instead of paying off the mortgage directly, you contribute to pillar 3a (tax-deductible). The 3a assets later serve as collateral or for repayment.

Whether buying or renting is more advantageous depends on several factors: Buying is more likely worthwhile with: - Long planning horizon (>10 years) - Low mortgage rate - Moderate expected investment return - High marginal tax rate (large mortgage deduction effect) Renting is more likely worthwhile with: - Short planning horizon (<5 years, due to purchase costs) - High expected investment return - Expensive property market (high purchase prices relative to rents) - Need for flexibility The break-even point is typically at 7-15 years -- before that, the purchase costs have not yet been amortised.