Saving for your own home with your pillar 3a

Withdrawals

Withdrawals, i.e. the advance withdrawal of pillar 3a funds, lead to more equity capital and helps you to achieve the minimum of 20% own funds required to take out a mortgage. In addition, the increase in equity capital can reduce the mortgage. The lower the mortgage, the less mortgage interest needs to be paid.

The tax payable on the 3a assets withdrawn must be taken into account. This means that not all of the 3a capital will be available for financing the residential property.

Pledges

Pillar 3a can be pledged in favour of a mortgage, and thus serves as collateral for the bank. This makes it possible to take out a larger mortgage. In the event of pledging, the capital remains in the pillar 3a account or custody account. The pension assets are only touched when realising pledged property. This occurs when the mortgage interest payments can no longer be made.

Amortisation

The mortgage can be amortised (i.e. repaid) either directly or indirectly:

• Direct amortisation: the pillar 3a assets are withdrawn and repaid to the bank. This reduces the mortgage debt, and thus also the interest costs of the mortgage.
• Indirect amortisation: regular payments continue to be made into the pillar 3a, and the tax advantages of the third pillar are retained. The mortgage debt does not change and the debt is not reduced. The 3a assets which are paid in on a regular basis are pledged and used to repay the mortgage at a later date (when the mortgage becomes due or on retirement).