Your guide to Swiss mortgages

Your guide to Swiss mortgages

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Learn about the quirks of the Swiss mortgage system to ease the process of getting a mortgage in Switzerland.

While most aspects of arranging a mortgage in Switzerland are similar to other countries, there are certain unusual features of the process you should be aware of. For example, in Switzerland people may use certain pension funds to act as security for a mortgage and often take out two mortgages on the same property. If you are buying a house in Switzerland, however, you might consider the low interest rates Switzerland offers.

Mortgage rates in Switzerland, which have historically been between 4 and 5 percent, dropped to historic lows – approximately 1 percent for Libor mortgages – following the lowering of the base Euribor rate. These rates look set to remain as the Swiss National Bank wants to keep the exchange rate as stable as possible.

Foreigners can get a Swiss mortgage – whether they are from the European Union (EU), European Free Trade Association (EFTA; Iceland, Liechtenstein, Norway and Switzerland) or third-national countries (non-EU/EFTA citizens) – provided they have the appropriate Swiss residence permit.

How do Swiss mortgages work?

Swiss banks usually lend up to 80 percent of the current market value of the property, which means that you have to pay a deposit of 20 percent. At least 10 percent must be put down in cash while the other 10 percent (or more) can be arranged using your pension fund – although, if you have not been in Switzerland for long, you might not have much money in such a fund.

Repayment periods for Swiss mortgages can be unusually long, with between 50 to 100 years not uncommon.

Using a pension fund to secure a Swiss mortgage

In Switzerland, you can use funds from a company pension or private pension to help finance your home. It is difficult to accrue enough Swiss pension in a short time, thus this option is unlikely to be available to those who have recently arrived in the country.

The following conditions apply: 

  • The property must be a primary residence;
  • It must be owned by you alone, or with a spouse or registered partner;
  • If you default on your mortgage you will also lose your pension;
  • You must already have paid into the pension fund and accrued a sum to pledge; 
  • This option is unlikely to be available if you aim to pledge a non-Swiss pension, for example, a company pension accrued in your previous country of residence.


If you are eligible, the two methods of using a pension to fund a deposit on a property are to withdraw the funds from the pension or to pledge the fund:

  • Withdrawing the funds and applying them to your mortgage will reduce your pension fund and your mortgage, thus reducing interest paid.  
  • Pledging the fund will allow you to retain the benefits and size of your pension fund but will not reduce the interest required.  


In both cases, your fund will be at risk if you do not keep up repayments on your mortgage and it is strongly recommended that you discuss your particular situation with a financial advisor. 

Two Swiss mortgages, one property

Swiss mortgages are unusual in that they are usually divided into two mortgages.

The first mortgage will typically: 

  • cover up to 60–70 percent of the purchase price;
  • have an indefinite repayment period.


The second mortgage will typically: 

  • cover the gap between the first mortgage and the deposit, for example, if the first mortgage is 60 percent and the deposit is 25 percent, the second mortgage will be 15 percent;
  • have a fixed repayment period, usually up to 15 years or the owner's retirement age;
  • have a higher interest rate, typically 1 percent higher than the first mortgage. 


Can you qualify for a Swiss mortgage?  

If you are living in Switzerland with a residency permit B (for EU/EFTA countries) or permit C (for non-EU/EFTA countries) you can apply for a mortgage and buy a property in Switzerland.

Under the Lex Koller regulations, non-residents need to apply for a licence/permit to buy from the cantonal authorities and there are restrictions on second home purchases in some areas. You will have to prove that you can afford to pay the repayments, evidence of deposit and show proof of residence.  

Guide to Swiss mortgages: Finding and arranging a mortgage in Switzerland

How much can you borrow?

Lenders in Switzerland will typically require that your monthly income is at least three times the amount required to repay the loan. Unusually, Swiss banks will often include maintenance or insurance charges in this calculation, so the income requirement may be higher than elsewhere for a loan of the same value. Your mortgage and maintenance expenses should usually not account for more than a third of your household’s gross annual income. 

Example loan calculation

Property value: CHF 700,000
20 percent deposit: CHF 140,000
Mortgage: CHF 560,000
   
Interest at 5 percent (sample rate): CHF 28,000 per year / CHF 2,333 per month
Principal repayment at 1 percent of loan amount per year: CHF 5,600 per year / CHF 466 per month
Upkeep at 1 percent of purchase price: CHF 7,000 per year / CHF 583 per month
 
Total costs:                                                                            

 
CHF 40,600 per year / CHF 3,383 per month

 
Therefore, multiplied by three suggests a minimum annual salary of CHF 121,800 or CHF 10,150 per month.
 
You should also consider:
  • Whether your salary is paid 12 or 13 times per year – if the latter, you should use your annual salary, not your monthly take-home pay, as lenders typically expect a 12-month salary.
  • Whether the minimum salary required is gross (before tax) or net (after tax).
  • Other living costs, such as charges for shared services. In Switzerland, these often apply to detached houses as well as apartments, and cover communal parking areas, private roads and similar maintenance issues.
  • The cost of purchasing a home, which in Switzerland is typically around 5 percent of the purchase price – your mortgage loan cannot be used to pay these fees. 


Online mortgage calculators

Work out the cost of a Swiss mortgage using one of these online mortgage calculators.


Cost of getting a Swiss mortgage

You will need to pay stamp duty, which is payable in part to the canton and in part to the commune. The amounts vary from region to region but as an example, Canton Vaud charges around 2.2 percent and most communes ask for a further 1.1 percent.

You will also have to pay fees to a notary (legal advisor) – around 0.8 percent of the purchase price – for legal documents, deeds, etc. 

Tax exemptions 

In Switzerland, property is treated as an asset, which is subject to both wealth and income tax. The property’s imputed rental value is added to your taxable income.

Mortgage interest, maintenance costs and indirect amortisation in connection with pension, however, are all income-tax deductible. 

For more information, see Expatica's guide to Swiss taxes. 

How to apply for a Swiss mortgage  

In Switzerland, loans are typically arranged directly with the lender, usually a major bank, rather than through a mortgage broker or agent. You can find more information about Swiss banks in our guides to opening a Swiss bank account and Swiss banking.

You'll usually have to contact the banks yourself and request information on rates, and paperwork may need to be done in person. If you are buying a house with a spouse, both parties will need to sign, often at the same time and usually in person.

Most Swiss cantons have their own cantonal bank. These only operate within the canton and often will not accept clients who are not resident in the canton, and will expect to transfer clients to another cantonal bank if they move away. It's worth checking if this will affect your mortgage if your new address is in a different canton to your old one.

The major lending banks in Switzerland are UBS, Credit Suisse and Raiffeisen, and of course the cantonal banks; each have their own set of products and rates. See our list of cantonal banks in Switzerland, plus other main Swiss banks.

Types of Swiss mortgages 

The specific details of products vary from lender to lender but you can expect to find the following types of mortgage in Switzerland: 

  • Fixed-rate mortgages
  • Variable-rate mortgages
  • Libor mortgage loan (linked to Libor, the global benchmark interest rate) 
  • Capped-rate mortgages
  • Bridging loans 
  • Offset mortgages, typically using funds deposited into a third pillar pension account with the same bank to offset interest paid on the mortgage. 


UBS publishes guideline interest rates
which can be useful for comparison with the situation in your country of origin.

What types of common mortgages are not available 

Interest-only mortgages (where you pay the interest only during the life of the mortgage loan and the capital at the end) and 100 percent mortgages (where no deposit is required) are rare or non-existent in Switzerland.  

For more information 

Hausinfo – in German 



Expatica

This information is provided as a guide only. If you need assistance in this area you are strongly advised to seek the help of a specialist in this field as each individual case is different.
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Updated: 2013; 2016.

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2 Comments To This Article

  • Darren posted:

    on 24th February 2016, 20:11:40 - Reply

    This is a good article, but in the example, it does'nt state over how many the mortgage repayments are.
  • Arturo posted:

    on 9th April 2015, 17:30:32 - Reply

    if we get our morgage in euros, to pay the property in Switzerland; will we benefit from a tax reduction?

    The interest rate we get abroad is so much lower that we are considering taking the morgage from another bank in Europe.

    [Moderator's note: You can also post questions on our Ask the Expert service]