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A mortgage is a loan to buy a property. Most run for 25 years but the term can be shorter or longer. The mortgage is secured against the value of your property until this has been paid off. If you cannot keep up your repayments, the lender can repossess your property.

Frequently asked questions (FAQ)

Look through the most commonly asked questions to help you to find your answer.

Swiss mortgages explained

  • What is a mortgage?

    A mortgage is a loan to buy a property. Most run for 25 years but the term can be shorter or longer. The mortgage is secured against the value of your property until this has been paid off. If you cannot keep up your repayments, the lender can repossess (take back) your property.

  • What is the minimum deposit required?

    Usually a minimum amount of 20% is required of the purchase price. Lower deposits are rare or non-existent. Banks may demand more deposit depending on your age and the value of the property.

  • Can you use your pension fund to pay the deposit?

    Of the 20% deposit, 10% must be paid in cash and the remaining 10% can be funded through other means, such as an occupational pension (known as 2nd pillar) or a private pension (known as 3rd pillar), which can be used as security against the mortgage rather than having to deplete your savings account.

  • How do you choose a lender?

    The majority of lenders are banks and approximately 10% of all mortgages are provided by insurance companies. Traditionally each canton has its own cantonal bank and typically you have to be resident in this canton and have a savings/current account with this bank in order to use its services. Nevertheless the larger banks are also present in the cantons. Mortgage brokers are becoming more common in Switzerland. Their (sometimes hidden) remuneration is usually paid by the banks (ultimately by the property buyer), which is often 0.5% of the total mortgage amount.

  • Who can buy a property?

    Switzerland has strict regulations about the purchase of properties by foreigners. This is the main reason why the property market is known to be very stable. You can buy a property if you own a Swiss passport or if you are an EU or EFTA national with a residence permit, or if you hold a B or C permit.

  • What is the forecast for interest rates?

    Mortgages interest rates in Switzerland are currently low. The historical long-term average is 4-5% and this is often used as a sample rate when assessing loan applications. As Switzerland has a stable economy and low inflation, interest rates are expected to remain stable in the foreseeable future.

How much can you borrow?

  • What are the lending criteria of banks?

    Your monthly income should be at least 3 times the monthly loan repayments. Banks usually include in their calculation interest, maintenance and insurance costs, raising the monthly income required. Frequently, other assets such as a pension are used to offset mortgage interest costs, and this may increase the amount you are able to borrow. It is important to be aware that when such funds are used, this will be considered collateral, and this you may lose if you do not repay the loan.

  • What is the maximum amount you can borrow?

    Your income, existing financial assets/ liabilities and age will determine the maximum amount you will be able to borrow.

  • What is the mortgage value compared to the property value?

    Banks value a property and offer you a loan based on that value. If this value is lower than the purchase price agreed, you will have to make up this shortfall between the mortgage and the actual purchase price.

  • Can you borrow to cover the additional costs?

    It not common in Switzerland that a loan also includes purchase or renovation costs. However, it does happen.

  • If the interest rate is low, can you apply for a higher amount?

    Not really. To avoid the risk of a higher interest rate in the future, banks use an interest rate of 5% to determine if you qualify for the loan.

Fees

  • Banks will charge a fee for the mortgage valuation, usually a few hundred francs. Additional mandatory acquisition charges will be payable on top of the house purchase price, such as local and cantonal taxes (i.e. stamp duty) as well as the deed registration in the Land Registry. These charges vary from canton to canton. Please check this with your notary.

Types of mortgages

  • What are the most common types of mortgage?

    The 3 most common types are mortgages with a fixed rate, a variable rate and a Libor (London Interbank Offered Rate) rate.

  • What is a fixed rate mortgage?

    A mortgage with a fixed interest rate and a fixed term.

    During the term of the mortgage:

    Fixed rate mortgages offer several advantages, and one is that borrowers know the amount of their monthly payment and therefore:

    • You protect yourself against rising interest rates during the agreed term.
    • You can plan your budget accurately.

    But:

    • You will not benefit from a fall in interest rates.
    • You may face high interest rates when the term expires.
  • What is a variable rate mortgage?

    A mortgage without a fixed term; the interest rate changes in accordance with the capital markets *.

    During the term of the mortgage:

    • You may benefit from the current capital market interest rates if these fall.
    • You may have the option to switch to a fixed rate mortgage (check with your bank).
    • You may have the option to amortise the mortgage directly (check with your bank).

    But:

    • Difficult to plan your budget accurately due to interest rate fluctuations.
    • No long-term certainty.

    * A capital market is a financial market in which long-term debt or equity-backed securities are bought and sold. Capital markets are defined as markets in which money is provided for periods longer than a year.

  • What is a Libor rate mortgage?

    A mortgage with a fixed term and a variable interest rate, which tracks the base rate (Libor **).

    During the term of the mortgage:

    • You may benefit from favourable and short term interest rates on the Swiss money market ***.
    • You may have the option to switch to a fixed rate mortgage (check with your bank).
    • You may have the option to amortise the mortgage directly (check with your bank).

    But:

    • Difficult to plan your budget accurately due to unpredictable interest rate fluctuations.
    • No long-term certainty.

    ** London Interbank Offered Rate: the interest rate fixed daily for interbank lending. Usually, a Libor mortgage in Switzerland tracks the CHF Libor rate, which is the interest rate that prime banks offer each other on short-term deposits in Swiss francs. The CHF Libor reflects the general interest rate level for short-term deposits in Swiss francs and is adjusted on a daily basis.

    *** Money markets are used for a short-term basis, usually for assets up to one year.

  • Interest only or repayment mortgage?

    All mortgages must include a repayment of the loan. Interest-only mortgages are rare. The repayment period is different than in other countries as it typically includes 2 mortgages.

  • What is the difference between the 1st and the 2nd mortgage?

    Usually a mortgage consists of two components: the 1st mortgage and the 2nd mortgage. In most cases, up to 80% of the property's value can be financed with mortgages. The 1st mortgage has an indefinite repayment period, while the 2nd mortgage must be repaid faster (in most cases 15 years).

    Mortgage 1:

    covers 60% (to 70%) of the purchase price

    Mortgage 2:

    covers the gap between this value and the total loan amount

    Example: If you have a deposit of 40%, then you only have one mortgage. If you have a deposit of 20%, then the 1st mortgage covers 60%, while the 2nd mortgage covers the remaining 20%. The 2nd mortgage must be repaid within 15 years or by your retirement age, whichever comes sooner. It will usually have an interest rate which is 1% higher than for the 1st mortgage.

Taxes

  • Buying or renting

    Buying a property can be an attractive option. Mortgage interest payments are permitted as a tax deductible each year.

  • Taxes

    For Swiss residents or non-Swiss residents with a secondary property in Switzerland, a property is subject to a wealth tax, but the rate is typically no greater than 0.3%. Following the sale of a property, there may be capital gains tax to pay.

Mortgage budget planner

  • By using our budget planner you will be able to work out what you spend each month. If you have a weekly, quarterly or annual amount, just change the box and the planner will do the calculation for you. A completed budget planner will assist you when you speak with your banker. Click here to go to the budget planner

Mortgage calculator

  • Our mortgage calculator is designed to help you determine how much you could afford to borrow and how much your monthly payments will be. As we neither provide mortgages nor promote financial institutions, our calculator simply serves as a guidance. It does not adapt to specific personal circumstances. Click here to go to the mortgage calculator

More FAQ

  • Swiss mortgages explained
  • How much can you borrow?
  • Fees
  • Types of mortgages
  • Taxes
  • Mortgage budget planner
  • Mortgage calculator