Amortisation / Life insurance

News from DL MoneyPark and information on the financial market and Swiss romande real estate

Author : Kristen

Direct or indirect amortisation?

Here is a quantitative comparison of a direct and an indirect amortisation scenario:

Example: simplified calculation for a loan of CHF 500,000 for one year (fixed rate of 3%) with an annual amortisation of CHF 5,000 and a marginal tax rate of 35% (taxable income around CHF 120,000).

Direct amortisation

 

 

 

 

 

 

Mortgage interest gain

5,000

x

3

%

=

150

Tax loss due to the non-deductibility of interest on taxable income

150

x

35

%

=

52.50

Net gain on direct amortisation

150

-

52.50

 

=

97.50

Indirect amortisation

 

 

 

 

 

 

Cost of mortgage interest

5,000

x

3

%

=

150

Tax savings due to the deductibility of 3rd pillar payments

5,000

x

35

%

=

1,750

Net gain on indirect amortisation

1,750

-

150

 

=

1,600

Net annual savings due to 3rd pillar

1,600

-

97.50

 

=

1,502.50

We believe that due to the marginal tax rate, the combined 3rd pillar interest covers an annual reduction in linear interest on the mortgage loan.

MORTGAGE SIMULATOR 

Articles on amortisation / life insurance