Selling your house in later life: when is the right time to downsize?

A house costs money even with empty rooms. Banks allow 1 per cent of the price a year for upkeep and running costs.¹⁰ For a flat costing CHF 1 million, that is CHF 10,000. By the same rule, the amount rises with the value. Then there are the garden, the roof and the heating, which you look after.

While you live there yourself, you pay tax on the imputed rental value (Eigenmietwert), a notional rent declared as income.⁵ It is abolished on 1 January 2029. With it goes the deduction for upkeep on a home you live in.⁵ With a paid-off house and low rates, you are more likely to benefit. The Federal Tax Administration names this group: typically retired people.⁶

What this means for you: tax is rarely the reason to move. What counts is your life plan and what remains net. Does the house still suit your life in five or ten years? A first answer comes from the home check in six questions.

Because the figure the whole calculation rests on changes: your income. After retirement, your pensions count, no longer your salary.^{11 12} The bank checks affordability (Tragbarkeit). That means whether it can still carry the mortgage on this income.

It calculates with an assumed interest rate of around 5 per cent, not today’s rate. On top comes 1 per cent of the value for upkeep and running costs.¹⁰ Depending on the bank, the total may take 33 to 38 per cent of your pensions. UBS stays at one third; Raiffeisen allows 38 per cent.^{11 12}

The loan-to-value (Belehnung), the share the bank finances, also falls. In later life, the mortgage is usually at most two thirds of the value. The second mortgage, the part above that, must be paid off by retirement.^{11 12}

What this means for you: the proceeds from your house count as your own funds (Eigenmittel). The more go into the flat, the smaller the mortgage. Only your own bank gives binding figures. A first check: the affordability calculator.

When you sell, you pay property gains tax. Only the gain is taxed: sale price minus purchase price, value-adding investments and selling costs.¹ The rate rises with the gain from 10 to 40 per cent, the same in every Zurich municipality.^{1 3}

For long-standing owners, the holding period matters most. From five full years, the tax falls by 5 per cent, then by 3 percentage points a year. From 20 full years, it is halved.¹ It falls no further. After that long, waiting gains you nothing.

If you then buy a flat to live in yourself, the tax is deferred: a replacement purchase (Ersatzbeschaffung).^{1 4} The deadline is usually two years before or after the sale.² If the flat costs less than the proceeds, part is taxed at once.²

What this means for you: deferred does not mean waived. Sell the flat later without a new replacement, and the deferred gain is taxed too.² Moving into a rented flat does not qualify. Your figure: the Zurich property gains tax calculator.

The first path: you buy a smaller flat. The money comes from your net proceeds: what remains after tax, mortgage and costs. Property gains tax can then be deferred, fully or partly.⁴

The second path: you sell and rent a flat. This is a fully valid option. It suits you if affordability becomes tight or you want to stay flexible. Or if you want to keep the proceeds for care or for your children.

The third path: you sell and rent your own house back. Here, caution is needed. With the sale, the buyer becomes your landlord. The buyer can end an open-ended tenancy with three months’ notice, without any particular reason.⁷ It only becomes safer with a fixed term or a waiver of notice, plus a priority notice in the land register (Vormerkung).⁷ Property gains tax is due at once.¹

What this means for you: the first two paths are clearly regulated. The third needs a carefully drafted contract. The details are under selling and renting back.

There is no fixed rule. Raiffeisen writes: «There is no standard solution» (translated).⁹ The move is safe when your sale does not depend on your purchase.

If you buy first, you carry two mortgages for a while. If the money from the sale is not there yet, you need bridging finance (Überbrückungsfinanzierung). This is an extra mortgage for the time in between. According to Raiffeisen, its interest is «usually somewhat higher» (translated).⁹ The higher mortgage must also remain affordable.⁸

If you sell first, you know your budget before you sign. You can still stay in the house. The purchase contract can set a later handover date. Or you rent the house back for a fixed term until the flat is ready.⁷ Both need the buyers’ consent.

What this means for you: set your goal and budget first, then the order. The page on moving home shows how the sale and the purchase fit together. My principle: your sale is never made to depend on a quick decision to buy.

Suppose your daughter would like to buy the family home. In Zurich, descendants are exempt from inheritance and gift tax.¹³ At market value, property gains tax is still due, as on any sale.¹

The risk lies in the price. If you receive less than 90 per cent of the market value (Verkehrswert), this counts as a waiver of assets (Vermögensverzicht).¹⁵ The difference is then counted for supplementary benefits as if you still had the money.¹⁴ Supplementary benefits (Ergänzungsleistungen) are a top-up to the AHV pension when pension and assets are not enough. The counted difference falls by only CHF 10,000 a year.¹⁵

A sale at market value, by contrast, is not a waiver.^{14 15} A friendly price can thus become expensive years later, should you then need supplementary benefits.

What this means for you: a fair price protects you. How the money is shared among the children is for a notary and legal advice. What applies when moving into care: see later life and care.