Life annuity

The life annuity is an act of sale between :
– The seller (creditor): continues to live in his property thanks to a « droit d’habitation » (or a « usufruit »), he receives a lump sum and/or an annuity until his death.
– The buyer (debirentier): pays the bouquet and/or the annuity until the seller’s death, then acquires the property.

The different types of life annuity :

This type of sale is a notarial act.

The 4 elements of a life annuity sale :
The market value of the property – This is the market value of the property. It is used as a basis for determining the amount of the usufruct (or right of habitation), then the bouquet and the annuity.
The « droit d’habitation » and « usufruit ») – The seller’s right to live in the property.
The bouquet – This amount is fixed between the seller and the buyer. This percentage generally varies between 20% and 30% of the market value of the property.
Annuity – The payment of a lifetime annuity to the seller by the buyer.

The ageing of society has important consequences on:

• The purchasing power of senior citizens
• Renegotiation of mortgages
•  Financing of health expenses
•  The reorganisation of housing

Senior citizens often find themselves with a nice property but with too little income to live their retirement fully or to contribute to the needs of their loved ones.

All surveys of senior citizens show that they want to “age well”, including two major points:

• Stay at home as long as possible;
• Have sufficient financial resources for current expenses, such as health, leisure, loss of autonomy and possible contribution to the needs of their children.

The life annuity is therefore the optimal solution for those who need additional income during their retirement.

Life annuity:

• The guarantee of an annuity for the rest of your life
• A potential support at home
• Allows you to monetise your real estate assets in order to improve your comfort of living
• Preserve financial autonomy

The ageing population in Switzerland

Life annuity financing in broad terms:
As with any property purchase, the buyer will have to meet certain conditions to obtain financing. The seller will need to ensure that the initial capital payment (the bouquet) covers, among other things, the repayment of any mortgage and penalty for early termination of the commitment, as well as the property gains tax and the broker’s commission. To pay the bouquet, the buyer will generally need to have his own funds, as banks will be reluctant to advance the sum through a loan. They will not be able to have a 1st rank guarantee on the property in question, but only a 2nd rank, as the seller’s « droit d’habitation or Usufruit » has priority. As a result, the banks cannot seize the property and ask the seller to vacate his home if, for example, the buyer does not repay his mortgage. However, if the property is already subject to a mortgage, the initial deposit paid by the buyer will be used to repay the mortgage. Nevertheless, Salmon Immobilier is a pioneer in finding solutions for obtaining a mortgage with the help of banking and insurance partners for private individuals.

Example of a life annuity sale :
Mr. Dunand, 70 years old, owns a villa.
The market value of his villa is CHF 900,000.
Value of the bouquet: CHF 250,000 (28%)
Value of the right of habitation for life: CHF 370,000
Value of the life annuity: CHF 1’900/month
The buyer is obliged to pay CHF 250,000 in cash to the notary at the time of the property transaction.
In addition, the buyer must pay CHF 1,900 per month to Mr Dunand until his death.