Stay, sell or rethink your plans?

For many people, their home is much more than just a property. It is the place where their children grew up, where they have lived for many years and where countless memories were made. It is therefore understandable that many homeowners want to remain in their familiar surroundings when they retire.

And in many cases, this is perfectly possible. Many people are healthy and active when they reach retirement age and want to continue enjoying the space their house or spacious apartment provides.

However, retirement can bring a financial change for homeowners: once employment income ends, the affordability of the mortgage is reassessed. What was easily affordable during working life can suddenly become a challenge when income is lower in retirement.

This is why it is worth reviewing your situation several years before retirement rather than waiting until you reach retirement age.

Learn more about financing your own home →

Loan-to-value ratio: Property appreciation can help

In addition to affordability, the loan-to-value ratio plays an important role.

For an owner-occupied residential property, the portion of the mortgage exceeding two thirds of the lending value generally has to be amortised within 15 years. Depending on the individual situation, banks may impose additional requirements.

For long-term homeowners, the increase in the property’s value can work to their advantage.

For example, someone who bought a house many years ago for CHF 1 million and whose property is now worth significantly more may have a considerably lower loan-to-value ratio than originally. A new valuation can therefore show that the existing mortgage is already significantly below two thirds of the property’s current lending value.

This means that even if some of the originally planned amortisation has not been completed, the current loan-to-value ratio may still fall within the limits required by the bank due to the property’s increase in value.

It is important to note, however, that the current market value is not automatically used as the lending value. Banks assess properties according to their own criteria and may use a lower value when determining the financing.

Affordability can become a stumbling block

The situation can be considerably more challenging when it comes to affordability.

Let us look at a simplified example:

A couple bought their house many years ago for CHF 1 million. At the time, affordability was calculated based on the property’s value and their income at that time.

If the house is now worth CHF 2 million, the affordability calculation takes into account a calculated interest rate of 5 % on the mortgage as well as additional maintenance costs of 1% of the property price. In our example, the amount doubled. At the same time, the household’s income is lower in retirement.

Property appreciation is therefore not an advantage in every respect: while it increases equity and generally improves the loan-to-value ratio, it can also affect affordability because maintenance costs are calculated as a percentage of the property’s value.

And this is where some homeowners face a challenge: The property is worth more than ever – but their income after retirement may no longer be sufficient to meet the bank’s affordability requirements.

What should homeowners do before retirement?

Around five years before retirement

The first step is to speak to your bank.

Have your future financial situation and, in particular, the affordability of your mortgage after retirement assessed. Also clarify whether any further amortisation is required and what options are available to secure your financing over the long term.

The earlier potential gaps are identified, the more options you have to address them.

Plan renovations with taxes in mind

Planned investments in your property should also be considered at an early stage and, where appropriate, carried out in good time.

The upcoming changes to the taxation of owner-occupied property are particularly relevant here: the abolition of the imputed rental value will take effect on 1 January 2029. At the same time, deductions for maintenance costs of owner-occupied properties will generally no longer be available. Cantons may continue to provide certain deductions for energy-efficient and environmentally friendly measures.

If you are planning major renovations, you should therefore discuss with your tax advisor when an investment makes sense from a tax perspective and which rules apply in your canton.

Around one year before retirement

Approximately one year before retirement, it is advisable to have another discussion with your bank.

By this stage, you should have clarity on:

• How much mortgage debt remains?
• What is the current lending value of the property?
• What amortisation is still required?
• How much will your future retirement income be?
• Will the mortgage remain affordable after retirement?
• Are any changes to the financing required?

This leaves sufficient time to make any necessary adjustments.

Why it pays to act early

If you only discover at retirement that your financing is no longer affordable in the long term, you have fewer options available.

Planning ahead, on the other hand, allows you to consider different scenarios. Depending on your individual situation, additional amortisation, adjustments to your mortgage structure or early retirement planning may make sense. Pension fund contributions or a withdrawal of pension assets may also form part of an overall strategy, depending on your personal circumstances and the tax implications.

It is important not to consider such decisions in isolation. What may appear financially advantageous can have other implications for your taxes or retirement planning.

Paying off the entire mortgage is therefore not always the best solution. What matters is having a financing structure that fits your personal situation, your income and your plans for retirement.

When can selling be the right solution?

Remaining in the current home is not necessarily the right solution for every homeowner.

Retirement often coincides with other major changes in a person’s living situation: children have moved out, an additional home office is no longer needed, or the desire for greater freedom and fewer responsibilities becomes more important.

Selling can then be a conscious decision for a new stage of life.

Common reasons for selling a home around retirement include:

• The financing is no longer affordable after retirement.
• The need for space has changed, for example after children have moved out.
• The house requires increasing amounts of work and maintenance, while the desire for more freedom grows.
• The capital tied up in the property could be used differently, for example for travel, a smaller property or other personal priorities.
• Moving to another location becomes attractive, for example closer to family and friends or to a more central location with good public transport connections.

Selling is not necessarily a last resort. It can instead be an opportunity to release the capital tied up in the property and consciously adapt your living situation to the next stage of life.

When should you start preparing for a sale?

If you already know that you may consider selling around retirement, I recommend starting the planning process around one year before your desired sale date.

Starting early gives you time for a professional property valuation, to determine the right time to sell and to develop an appropriate sales strategy.

However, even if a sale needs to happen more quickly, having the right strategy is crucial. Every property and every personal situation is different. The key is to assess the starting position correctly and position the sale in a way that makes the most of the property’s potential while taking your current needs into account.

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Retirement is a new stage of life – and your property can be part of it

Retirement does not have to mean giving up your familiar home. If you feel comfortable in your house or apartment and the financing is secure for the long term, there is no reason why you cannot continue to enjoy your home.

At the same time, retirement is a good opportunity to consciously reconsider your current living situation.

Stay, sell or downsize? There is no single right solution.

What matters is to consider early on which option fits both your financial situation and your personal plans for the next stage of life.

I would be happy to help you assess the value of your property, consider different sale scenarios and develop a suitable sales strategy.