How owning a home can contribute to financial security in retirement.

Home ownership is not only a home, but also a lever for security in retirement, as long as you get the renovation, mortgage and taxes right.

Renovate and reduce costs

Renovations and modernizations are an initial approach. They are often expensive, but can reduce costs in the long term if they consistently focus on operating costs and value retention. Energy-related measures in particular, such as replacing heating systems or improving the building envelope, reduce energy consumption and therefore running costs. There are also subsidies available in Switzerland: The federal and cantonal building program supports investments in energy efficiency and renewable energies.

Check your mortgage in good time

Financing is at least as important as the structural condition of the property. Many mortgages continue to run unchanged for years until the moment comes when affordability is reassessed at retirement age. Banks often do not calculate with the current interest rate, but with an imputed interest rate (often around 5 percent) and also take ancillary and maintenance costs into account. At the same time, the following typically applies: The total housing costs should not exceed a certain proportion of income, and the loan-to-value ratio must often be reduced to around two-thirds of the property value by retirement age. If you examine this logic early on, you can adjust the term, amortization or structure of the mortgage so that it remains stable after retirement.

Optimize taxes

If it is clear what is deductible and how to plan it wisely, there is tax potential. Maintenance costs and certain energy-related renovations can be claimed for tax purposes; debt interest also often plays a role. The distinction is important: value-preserving is not the same as value-enhancing, and cantonal rules and practice differ. Forward-looking planning that coordinates income and deductions ensures that deductions are not wasted.

In addition, the tax framework for home ownership is in political flux. The discussion about reforming the imputed rental value and possible changes to deductions (including debt interest and maintenance) could significantly change the starting position, depending on when they come into force.

Gain freedom

Renovation is not always the best solution. Sometimes a sale can make more economic sense – for example, if the house has become too big or maintenance is becoming increasingly expensive. A sale can create financial flexibility and enable a change to a smaller or age-appropriate form of housing.

A home is a valuable resource and can make an important contribution to financial security in retirement. The key is to carefully examine the various options and choose solutions that suit your personal situation.

Checklist

• Check your home situation honestly: is the size, condition and cost still suitable for the stage of your life?

• Plan renovations in a targeted manner: Only invest where costs can be reduced or value retention is assured.

• Check your mortgage: Affordability in retirement, terms and interest rate risks.

• Plan taxes with foresight: clarify deductibility and stagger measures sensibly over time.

• Keep your options open: Renovate, adapt or sell – make a decision based on numbers and needs.

Sources and further links on the topic

Raiffeisen – “Mortgage in retirement” (affordability, imputed interest rate, reference values)(Raiffeisen Switzerland)

PostFinance – “How to keep your home affordable in old age” (affordability, loan-to-value, imputed interest)(PostFinance)

HEV Switzerland – “Mortgages” (imputed interest rate, affordability)(HEV Switzerland)

VermögensZentrum – “Maintenance costs: What is tax deductible?” (flat-rate deduction, cantonal differences)(Vermögenszentrum)

BDO – “Planning property maintenance and energy-efficient renovations in a tax-optimized manner”(BDO Switzerland)

Tax book Canton Lucerne – Guidelines on deductible maintenance/administration costs(tax book)

Canton of Zurich tax book – Deduction entitlement for maintenance costs (information sheet)(Canton of Zurich)

The Buildings Program (Confederation/Cantons) – Subsidies for energy efficiency/renewable energies(dasgebaeudeprogramm.ch)

SwissEnergy – Overview “The building program”(SwissEnergy)

FDF (Confederation) – Information on the reform of residential property taxation(Federal Department of Finance)

Raiffeisen – “Current discussion on imputed rental value” (possible changes to deductions)(Raiffeisen Switzerland)