Question 1

How much equity do I need for a mortgage in Switzerland?

Accepted Answer

In Switzerland you need at least 20% of the purchase price as equity. Of this, at least 10% must come from so-called "hard" equity – i.e. savings, pillar 3a assets, advance inheritances or gifts. The remaining 10% can come from the pension fund (2nd pillar).

Question 2

What does affordability mean for a mortgage?

Accepted Answer

Affordability determines whether you can afford the mortgage over the long term. Banks calculate with an imputed interest rate of around 5%, annual amortization costs and ancillary costs (1% of the property value). Total housing costs may not exceed one third of your gross income.

Question 3

What is the difference between a fixed-rate mortgage and a SARON mortgage?

Accepted Answer

A fixed-rate mortgage has a fixed interest rate for a chosen term – this provides planning certainty. The SARON mortgage is based on the Swiss reference rate SARON and adjusts regularly. It is often cheaper but carries the risk of rising interest rates.

Question 4

What is tranching and when does it make sense?

Accepted Answer

With tranching, the mortgage is split into several parts (tranches) with different terms and interest rate models – for example, one tranche as a fixed-rate mortgage and one as a SARON mortgage. This spreads the interest rate risk but can limit flexibility when switching banks.

Question 5

How does mortgage amortization work?

Accepted Answer

The 1st mortgage (up to 65% of the property value) does not necessarily have to be amortized. The 2nd mortgage (65–80%) must be repaid within 15 years or by retirement. There is direct amortization and indirect amortization (paying into a pillar 3a account, which serves as collateral).

Question 6

What is the difference between direct and indirect amortization?

Accepted Answer

With direct amortization you repay the mortgage directly – the debt, and therefore the interest, decreases continuously. With indirect amortization you pay into a pillar 3a account, which is pledged to the bank. The mortgage amount stays the same, but you benefit from tax deductions on both the 3a contribution and the mortgage interest.

Question 7

What ancillary costs arise when buying a property?

Accepted Answer

Typical ancillary costs: property transfer tax (1–3% depending on the canton), land registry fees, notary costs, any broker commissions and moving costs. Overall you should budget 3–5% of the purchase price. On top of that come ongoing costs such as maintenance, insurance and imputed rental value.

Question 8

What is imputed rental value and how does it affect taxes?

Accepted Answer

Imputed rental value is a notional income that homeowners must declare for tax purposes – based on the rent they could theoretically charge for their property. In return, mortgage interest and maintenance costs can be deducted from taxes. Imputed rental value is usually 60–70% of the market rent. Note: from 1 January 2029, imputed rental value taxation will generally no longer apply to owner-occupied primary and secondary residences. However, cantons may tax secondary residences separately.

Question 9

Can I use my pension fund to buy a home?

Accepted Answer

Yes, as part of home ownership promotion (WEF) you can use pension fund assets as equity – either as an early withdrawal or as a pledge. An early withdrawal reduces your retirement benefits and is taxed. A pledge leaves the balance in the pension fund but increases the mortgage. Up to age 50 you can withdraw the entire balance.

Question 10

How do I find the best mortgage interest rate?

Accepted Answer

Compare offers from banks, insurers and pension funds. We can negotiate the best terms for you, as we have access to multiple providers. Even small interest rate differences make a big difference over the term of the loan.

Question 11

What happens to my mortgage when I retire?

Accepted Answer

Many banks require the mortgage to be reduced to a maximum of 65% of the property value by the time of retirement. Affordability is then recalculated based on retirement income (AHV + pension fund). It's worth planning this early so you're not caught off guard.

Question 12

Can I renew my mortgage with a different provider?

Accepted Answer

Yes, once your fixed-rate mortgage expires you can switch to another provider. It's advisable to obtain quotes 6–12 months before expiry. Switching can be more difficult for tranched mortgages held with the same bank. Forward mortgages let you lock in the interest rate up to 2 years in advance.

Question 13

What is a forward mortgage?

Accepted Answer

A forward mortgage locks in the current interest rate for a mortgage that only starts in the future (e.g. in 6–24 months). This makes sense if you expect rates to rise. You pay a forward premium for this, which varies depending on the lead time.

Question 14

How do rising interest rates affect my mortgage?

Accepted Answer

With a fixed-rate mortgage, nothing changes until the term expires. With a SARON mortgage, monthly costs rise directly with the interest rate level. When renewing a fixed-rate mortgage, higher rates can significantly increase the monthly burden. The banks' affordability calculation protects you from overextending yourself.

Question 15

Which mortgage suits me – fixed or variable?

Accepted Answer

This depends on your risk appetite and financial situation. Fixed-rate mortgages offer security and predictability – ideal for families and tight budgets. SARON mortgages offer savings potential when rates are falling or stable, but require financial reserves for rate increases.

Question 16

What is the loan-to-value of a property?

Accepted Answer

The loan-to-value is the value of the property as estimated by the bank, based on the purchase price and its own valuation. The bank uses the lower of the two values (lowest-value principle). The maximum mortgage is 80% of this value.

Question 17

Can I get a mortgage as a self-employed person?

Accepted Answer

Yes, but the requirements are stricter. Banks generally require 2–3 years of financial statements and stable income. More equity (25–30%) improves your chances. Some banks specialize in the self-employed and offer more flexible solutions.

Question 18

What happens to the mortgage in a divorce?

Accepted Answer

In a divorce, it must be clarified who takes over the property and the mortgage. If one partner takes over the house, affordability must be given on their own, and the other partner must be released from joint liability. Often the property is sold and the proceeds divided after deducting the mortgage.

Question 19

What documents do I need for a mortgage application?

Accepted Answer

Typically: salary statements for the last 3 years, current tax return, debt collection extract, proof of equity, land registry extract, property valuation, floor plans and photos. Self-employed applicants must also provide financial statements and any business plans.

Question 20

Is mortgage advice worthwhile?

Accepted Answer

Yes, especially for first-time buyers and renewals. We know the market, compare offers from several providers and negotiate better terms. Even a 0.2% difference in interest saves around CHF 1,600 per year on a CHF 800,000 mortgage.

Taking out a mortgage:
The 20 most common questions

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Taking out a mortgage:The 20 most common questions