My view, has been for a long time, if you want something, save up and buy cash
While I agree whole heartedly with the sentiment, it falls down when it comes to a home.
You need to live somewhere. If you choose not to buy until you have the cash saved up, then you need to pay rent in the mean time. Paying rent, means that you’ll probably not be able to save very much at all, as rents usually aren’t all that much less than a mortgage.
It gets worse over time (generally) as your mortgage stays the same (ignoring interest rate changes which can go either direction), but rents on average go up over time. So you end up paying more rent than you would have paid in mortgage repayments.
For discretionary items, I totally agree with your sentiment.
dublinpilot wrote:
You need to live somewhere. If you choose not to buy until you have the cash saved up, then you need to pay rent in the mean time.
There’s always the Italian way: Mama 
achimha wrote:
Switzerland might be an exception because of the weird law allowing you to deduct interest payments from your income (a huge subsidy for the banks) — there 100% mortgages with only interest payments in combination with investment in funds (another subsidy for the banks) makes a bit more sense than elsewhere.
Achim, the maximum we can do is 80%, just for information. The usual way is that people get an 80% financing (whereas up to 66% as a first mortage with very low interest and the rest with a 2nd mortage with higher interest. The 2nd one gets paid off, the 1st one stays and gets reduced to a level where tax cost and mortage cost reach a balance and that is where it stays. It is hugely different in each case, in average I’d say people keep a mortage of about 60%. The thought behind that is that the mortage business finances a lot of the pension funds. So the status quo here primarily is intended to serve the pension system, while it of course also helps the banks. What must be said however is, that Switzerland also knows a factor called “equivalent rental income” (Eigenmietwert), which calculates a sum you’d get were you to rent your property out. That value needs to be taxed as income. And that is the value which gets balanced with the interest rate.
Peter wrote:
I bought a house in 1987 for £105k and sold it in 1995 for £75k. That’s a 50% drop in value, after allowing for inflation. So it can go down…
It can, but that is very rare at least here. In Zürich and environment, prices have exploded in the last several years. Of course, what can happen is that if interest rates would soar now, high priced properties would fall from the current price, however in the long term, no property has ever lost value. Of course it can happen that like in the US if you have a property crisis and you bought on the hight of the hype and HAVE to sell in the crisis, but even in that case, most of the time property values will jump back to the pre-hype values rather quickly.
What I put forth as a rule for myself is that I calculated my mortage on the basis that it will rise to 6%. (Currently it is a 1%, when we bought in 2001 it was 3.5%) So I have to be able to afford a mortage up to that, which was the highest they went in the last few decades.
And that is another factor. Due to the 20-25% you have to pay upfront, people who did not buy pre the hype today can not buy because prices exploded to 2-3 times the 2001 level. Terraced houses like ours in our region went for between 300-500k then, today you won’t find anything below 700-800k but rather upwards of one million. We were extremely lucky we did what we did at the time, as also I could not afford to rent in our area, where normal rentals are in excess of 2k CHF per month for a 2 bedroom room flat. And people who do buy today and are totally maxed out with the cheap financing they get, will get in big trouble the moment the interest rates climb. That will cause a lot of defaults and collapse that segment of the property market, as it did before. Which then of course will be exploited by people trying to move upmarket and prices will go up again. Been there, seen it, was lucky to have struck in the right moment. Hopefully I can get out as long as the prices are that high as well.
There’s always the Italian way: Mama
Mamma does a fine job until you marry, then papà buys you and your bride an apartment, which frees up cash flow to allow you to save for a house. It’s actually a pretty good system if you build additional equity over a lifetime and pass it on to the next (Italian) generation.
My rather more puritanical background had me starting with $125 USD in the bank, a job, and a $300/month room… which also worked OK 
Low interest fixed rate mortgages on property, mortgage interest deduction, no prepayment penalty and paper depreciation continue to help. Truth in advertising dictates my saying that my aircraft #2 was originally bought with money coming out of a rental property refinance, but I rapidly paid it off… (I just remembered that)
Ahhhhh, but now I am still puzzled about what plane you would all buy.
There’s always the Italian way: Mama
The problem with getting money off parents is that nowadays they tend to live until you are in your 50s, and they spend what they have on hobbies (like flying) so by which time you get it you don’t need it to buy a house. If you are in luck you could buy a plane out of what they leave but that’s about it
Fletio_Flyer wrote:
Ahhhhh, but now I am still puzzled about what plane you would all buy.
Based on the way this thread is going [downhill], looks like no ones’ gunna buy no damn plane
Everything i own was bought cash, and even my company is 100 percent self financed. All our company cars are bought cash.
This concept has one big advantage (that is worth more to me than saving some taxes): I do not have to talk to bankers, and that means life quality to me.
This works because we always left at least 50 percent of every cent me made in the company.
Flyer59 – couldn’t agree more about the bankers. They’re always crawling all over you when you already have the cash, and when you don’t and need it, they won’t give you the time of day. Good riddance, I’ll be my own bank.
Like the Swedish pop star once said on financial success: “When you can finally afford to buy your own drinks, that’s when they’re all free”.
Exactly, Adam!
I once was in court against a big german bank who simply stole € 300.000 from me. The story is so unbelievable, … i’ll keep it for a Fly-in. Anyway, i lost one time in court – and finally won at the highest german court. Got it all back, plus interest. But that was really the end of my relationship with banks. Now i only use them for my own purposes.
But before me my father already ran the company like that. First i was surprised when i learned that he would actually BUY all the cars we need. He used to say (he died this year) “a bank will give you an umbrella when the sun shines – and take it away when it starts raining”. My experience too.
We do not even insure our company cars (only the necessary liabiliy), not even against theft or anything. From the insurance we saved that way we could buy an extra AMG GT for fun …. :-) And even if an employee wrecks his car .. so what! We can always buy a new one just from the insurance we saved.
