# Any lessons for us in Swiss interest-only mortgages?



## Brendan Burgess (4 Mar 2013)

I understand that the Swiss have no problem with giving interest-only mortgages forever.  They don't require that the loan is repaid at all. The lender keeps getting interest. 

I looked for a guide to this, but only found different references. Anyone know in detail how they work? 

My view is that we should not be too concerned about borrowers  who can't repay capital at the moment, but who can service the interest in full. These should be classified as sustainable mortgages. When I say this, I am asked what happens when they retire.   I explain that they continue to pay the interest in much the same way that people who rent all their lives continue to pay the rent.


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## Brendan Burgess (5 Mar 2013)

Hi Jim

Could you give us an outline of how they work?  
What is a typical profile of a borrower? 
Presumably the borrower has a 20% (?) deposit? 
Is it interest-only forever? 
Is the only security the property itself or do they have to have a savings policy with which to pay off the mortgage? 
Do they also have annuity mortgages? 
Do they get tax relief on the interest paid? 

What would be the decision making process of say a couple in their late 20s who face the buy vs. rent decision? 
Is it cheaper to rent than to buy? 
Are the mortgages fixed-interest for a long period? 

What lessons could we learn in Ireland from the system?


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