With mortgages it goes fast times around a beautiful stange money. Large amounts mean large risks. It is important that you are aware of these potential risks and know how to protect yourself against them.
What risks are there for my mortgage?
With a mortgage you enter into a long-term commitment of several hundred thousand francs. However, life is unpredictable: moments of luck and strokes of fate usually hit you unexpectedly. Some of these inflection points can pose a risk to your mortgage, especially the following:
- An accident that prevents you or your partner from continuing to work.
- A serious illness that keeps you out of work for several months.
- An unexpected job loss and the unemployment that comes with it.
- A death in the family.
Why is my mortgage affected?
When you take out a mortgage, the bank will take a close look at your financial situation. It checks whether you have enough capital and income to afford your house or apartment. In technical jargon, this is referred to as "loan-to-value" and "affordability". The loan-to-value ratio is the ratio of the mortgage to the purchase price. The upper limit is 80. Affordability is the percentage of your home expenses compared to your income.
As a rule of thumb, the cost of mortgage interest, utilities, and amortization should not exceed one-third of your long-term budget to ensure that you have enough money for the rest of your living expenses.
You can try it yourself with our mortgage calculator. You can use it to calculate various scenarios without any obligation and find out up to what income you could still afford your mortgage.
What you can find out in our mortgage calculator in a playful way, your bank will check at regular intervals. If you can no longer work or one of several borrowers dies, that often means less income as well. This increases the risk for your lender that you will no longer be able to pay your mortgage interest.
If your affordability rises above the critical threshold of one-third due to this reduction in income, the bank may refuse to continue your mortgage. If you don't find another provider, you will have to sell your house or apartment more or less voluntarily to repay your mortgage. In the worst case, the bank can make use of its right to sell your property on its own initiative.
What hedging options are there??
But don't worry – you can protect yourself in many cases! If you don't want to leave your financial future to chance, there are a few options: several financial institutions offer insurance solutions for mortgages. This insurance cover refers to unemployment, disability and death. The premium includes an annuity and financial protection so that the beneficiaries can keep the house and mortgage if the worst happens.
Double is better 
If you unexpectedly lose your job, this type of insurance will cover the interest on your mortgage. However, it should be noted that this is usually a very expensive measure and only covers a certain period of time. In addition, it often does not apply if the unemployment is self-inflicted or even due to your own resignation.
The life insurance option
Another option is life insurance. You basically have two options: a pure term life insurance or a mixed life insurance. The former protects you against loss of income due to an accident or illness and can cover the financial risk of death.
With a mixed life insurance you also cover these risks, but build up a savings capital at the same time. The saved capital is available to you even if no stroke of fate occurs. This insurance has therefore rather the character of a precautionary product and becomes the 3. The second pillar, i.E. Voluntary retirement savings, is assigned to you.
Life insurance and mortgage
With both insurance options, you take precautions so that you can keep your home and mortgage even in the worst case scenario. The loss of income due to disability or death is cushioned by an annuity or a one-time capital payment. This allows you to continue to meet your affordability requirements.
As with any save 3 product, you can also use blended life insurance, i.E. Those with a savings element, as additional collateral for your mortgage. It is even possible to make indirect amortizations in this way.
Here's how it works: instead of repaying your debt directly, you pay a regular amount into your pledged life insurance policy. Because the savings portion increases, the security for the bank automatically increases. This way you can reduce your tax expenses, provide for the third stage of your life and protect yourself against unforeseeable events. So you kill three birds with one stone.
Optimize interest rates thanks to life insurance
If this is not enough for you, I will give you a fourth reason: by taking out and pledging a mixed life insurance policy, your creditworthiness as a mortgage customer increases for the bank or insurance company.
You may well be rewarded with an interest rate discount. If you want to take out a mortgage and choose an insurance company as your credit partner, you can combine this with taking out a life insurance policy. Maybe they will still accommodate you with the interest rate. And even if not, at least you have everything in one place.
As you can see, it can pay to protect your mortgage and especially your financial future. If you want to learn more about mortgages in general, you will find many interesting articles on our platform. And if you have any questions, feel free to contact us by mail or phone.