28-01-25 Housing shortage: Zermatt requires hoteliers to house their staff (source rts)
The regular repayment of part of a bank loan over a defined period is called amortization. There are two types of amortization: direct amortization and indirect amortization.
Direct Amortization
With direct amortization, the debt is gradually reduced, usually every quarter, by a fixed amount. This way, the debt amount and the interest burden are progressively reduced.
Indirect Amortization
With indirect amortization, the debt remains unchanged. For example, as a homeowner, you pay the amortization amount into a pillar 3a pension plan, which is pledged as collateral to the bank. This way, you build up retirement savings. After 10 to 15 years, the capital is withdrawn to repay the debt in one go.
Advantages of Direct Amortization:
source : UBS Amortissement
source : Rhône FM
About Cerise Immobilier Real Estate Agency
Cerise Immobilier is a real estate agency based in Villars-sur-Ollon in the canton of Vaud, Switzerland. It offers services in property sales, purchases, rentals, condominium management, real estate valuation, and fiscal and legal advice. Operating primarily in the Vaud Chablais region, the agency serves areas such as Ollon, Gryon, Bex, Aigle, Les Diablerets, Chessel, Leysin, Lavey, Noville, Roche, Yvorne, and Villeneuve.
Direct Amortization
With direct amortization, the debt is gradually reduced, usually every quarter, by a fixed amount. This way, the debt amount and the interest burden are progressively reduced.
Indirect Amortization
With indirect amortization, the debt remains unchanged. For example, as a homeowner, you pay the amortization amount into a pillar 3a pension plan, which is pledged as collateral to the bank. This way, you build up retirement savings. After 10 to 15 years, the capital is withdrawn to repay the debt in one go.
Advantages of Direct Amortization:
- Gradual debt reduction: The loan amount decreases over time, reducing the interest burden.
- Lower long-term interest costs: Since interest is calculated on the remaining capital, you pay less interest as you repay the loan.
- Simplified management: Regular, predictable payments make budgeting easier.
- Higher short-term expenses: You must pay both interest and the amortization amount, which can strain your monthly budget.
- Fewer tax benefits: By reducing the debt, you lower the deductible interest, which may increase your taxable income.
- Tax benefits: You can deduct loan interest from your taxes, and contributions to a pension plan (like pillar 3a) are often tax-deductible.
- Capital accumulation: The money you deposit into a savings or investment account can grow over time.
- Long-term flexibility: You keep the full loan amount but repay it all at once with the accumulated savings.
- Constant interest burden: Since the debt doesn’t decrease, you continue to pay interest on the total loan amount until the final repayment.
- Market risk: If your pension plan or investments perform poorly, you might not accumulate enough to cover the debt.
- Management complexity: Managing both a mortgage and a savings plan requires more monitoring and financial knowledge.
source : UBS Amortissement
source : Rhône FM
About Cerise Immobilier Real Estate Agency
Cerise Immobilier is a real estate agency based in Villars-sur-Ollon in the canton of Vaud, Switzerland. It offers services in property sales, purchases, rentals, condominium management, real estate valuation, and fiscal and legal advice. Operating primarily in the Vaud Chablais region, the agency serves areas such as Ollon, Gryon, Bex, Aigle, Les Diablerets, Chessel, Leysin, Lavey, Noville, Roche, Yvorne, and Villeneuve.
