Rent or buy if you want to retire early in Switzerland

Housing is the biggest line in most budgets. Owning or renting changes your retirement spending, the size of the pot you need and how much of your wealth you can reach. In Switzerland there is an extra twist: banks care about your income, not just your wealth.

What owning really costs

A common mistake is to compare the rent only with the mortgage interest. A fairer comparison counts three things:

1. Mortgage interest. What you pay the bank.
2. Upkeep. About 1% of the property value a year is a common planning figure.
3. The return you give up on the money you put into the down payment.

Example A CHF 1,200,000 flat, with 20% down (CHF 240,000), a mortgage of CHF 960,000 at 2% and upkeep of 1% a year.

That is about CHF 3,300 a month, or 3.3% of the price. If a comparable flat rents for CHF 3,000 a month, the yield is 3%, and renting is slightly cheaper. If it rents for CHF 3,600, buying wins. The answer moves with prices, rents and interest rates, so use your own.

What it does to your FIRE number

A home without a mortgage removes rent from your budget. At a 3.5% withdrawal rate, CHF 2,000 of monthly rent corresponds to CHF 686,000 of pot. So a paid-off home is a powerful way to lower the number. See your FIRE number.

The cost is that capital is locked in one asset in one place, and repairs are on you.

The Swiss mortgage problem

Banks check affordability with a stress interest rate of 5% and require the costs to stay within about one third of your income. If you stop working, your income falls and the check fails. Early retirees often find that a new mortgage or a renewal is hard to get when their income is low and their wealth is high. Plan this before you stop, not after.

Using pension money

Pension fund and Pillar 3a money can be used for a primary residence, within limits, and it reduces your pension later. At least part of the 20% down payment must come from other funds. Check the rules with your fund before you plan around them.

A simple rule for early retirees

Either own the home outright, or with a small mortgage, before you stop working, or rent and invest the difference. Avoid a large mortgage on the day your salary ends.

For the same question abroad, read buying or renting abroad versus staying in Switzerland. For the mindset, see you need less than you think. For the other end of the road, see rent for life, die with zero. Taxes on the home are in taxes in early retirement.

Next step

Open the calculator, lower the spending by your rent and see how much earlier you could stop.