Amortisation
Plan the optimal, tax-efficient repayment of your mortgage
Amortisation: repaying your mortgage cleverly
Amortisation means gradually repaying your mortgage. In Switzerland it's common not to repay the mortgage in full, but to stop at around 65% loan-to-value – for tax reasons.
The question is: how much should you amortise? Directly or indirectly? And what does that mean for your taxes? The right amortisation strategy can make a difference of tens of thousands of francs over the years.
Your benefits at a glance
Clear strategy
Optimal amortisation plan for your situation
Tax optimisation
Maximum tax savings through indirect amortisation
Debt reduction
Systematic reduction of your mortgage debt
Wealth accumulation
Parallel build-up of pillar 3a assets
Transparency
Clear overview of costs and benefits
Protection
Can be combined with risk insurance
In-depth knowledge
Direct vs. indirect amortisation
There are two ways to amortise your mortgage:
Direct amortisation: You regularly repay part of the mortgage. The debt falls, and so does the interest – but so does your debt interest deduction for tax purposes.
Indirect amortisation: Instead of reducing the mortgage directly, you pay into a pillar 3a policy. The balance is pledged to the bank. The mortgage stays the same, you continue to benefit from the debt interest deduction and can additionally deduct your 3a contributions.
In most cases, indirect amortisation is more tax-efficient.
Understanding the 65% threshold
In Switzerland, banks require the mortgage to be reduced to 65% of the lending value within 15 years. The first mortgage (up to 65%) doesn't need to be amortised.
Example: For a house worth CHF 1 million with 80% financing (a CHF 800'000 mortgage), the 2nd mortgage of CHF 150'000 (80% - 65% = 15% of the value) must be repaid within 15 years.
That amounts to roughly CHF 10'000 per year or CHF 833 per month.
Once the 65% threshold is reached, it's up to you whether you continue amortising or not.
Tax optimisation
The amortisation strategy has significant tax implications:
Debt interest deduction: Mortgage interest can be deducted from taxable income. The higher the mortgage, the higher the deduction.
Pillar 3a deduction: With indirect amortisation you can additionally deduct your 3a contributions (2024: max. CHF 7'056 with a pension fund).
Wealth tax: A high mortgage reduces taxable wealth.
The optimal strategy depends on your marginal tax rate, the interest rate situation and your personal preferences.
Voluntary amortisation: yes or no?
Once the 65% threshold is reached, the question arises: keep amortising or not?
Arguments for further amortisation: - Lower debt = less risk - Psychological relief - Better starting position for refinancing - Important for retirement (lower income = stricter affordability)
Arguments against: - Tax benefits are preserved - Capital remains flexibly available - With low interest rates: returns on the capital market are often higher than the mortgage rate
The decision is individual. We analyse your situation and give you a clear recommendation.
Avoid common mistakes
These are the mistakes we see most often in practice
Amortising directly instead of indirectly
You forgo the tax benefits of pillar 3a.
Amortising too quickly
Capital is missing for other investments or emergencies.
Amortising too little before retirement
Affordability with retirement income becomes a problem.
Not planning amortisation
Financial bottlenecks or missed tax benefits.
Checklist: your next steps
What you can do right now
Frequently asked questions about Amortisation
Answers to the most important questions
Related topics
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Direct or indirect amortisation? We find the tax-optimal solution.
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