Learn about the quirks of the Swiss mortgage system to ease the process of getting a mortgage as an expat in Switzerland.
If you’re thinking of buying a home in Switzerland, it’s helpful to learn about how the mortgage system works. While most aspects of arranging a mortgage in Switzerland are similar to elsewhere, there are a few quirks to be aware of.
In this guide, the expert financial planning expert Key Investment offers advice on how to get a mortgage in Switzerland.
Key Investment has been offering financial advice to expats in Switzerland for over 20 years. The company primarily focuses on banking, tax and insurance advice for professionals working in Switzerland.
Mortgage rates in Switzerland
If you are buying a house in Switzerland, you may initially be taken aback by how low mortgage rates are.
Mortgage rates in Switzerland were historically between 4 and 5%. In recent years, they dropped to historic lows, costing as little as 1% following the lowering of the Euribor rate.
Despite some uplift during 2018, rates fell again in early 2019; average five-year rates dropped to 1%, and 10-year rates at just 1.35%.
Mortgage rates vary dramatically from bank to bank. Rates are heavily influenced by your personal circumstances and financial history, so it pays to shop around.
Online mortgage calculators
Work out the cost of a Swiss mortgage using one of these online mortgage calculators:
How do mortgages work in Switzerland?
Switzerland’s strict lending rules mean it can be hard to get a mortgage with a small deposit. Once you have a mortgage, however, monthly repayments are usually manageable; Swiss mortgage terms are often longer than in other countries.
Swiss banks usually offer a mortgage of up to 80% of the current market value of the property. This means that you must pay a deposit of 20%. At least 10% must be put down in cash while the other 10% (or more) can be arranged using your pension fund.
Repayment periods in Switzerland can be incredibly long, with deals lasting between 50 and 100 years being relatively common.
Using your pension fund to secure a Swiss mortgage
One of the main quirks of the Swiss mortgage system is that you can use funds from a pension to finance your home. While this is possible for expats, it might be difficult to accrue enough pension if you recently arrived.
To use pension funds to finance your home, you’ll have to adhere to the following rules:
- The property must be your 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 use a non-Swiss pension.
If you’re 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 reduces your pension fund and your mortgage, thus reducing interest paid. Pledging the fund allows you to retain the benefits and size of your pension fund but doesn’t reduce the interest required.
In both cases, your pension fund – as well as your home – is at risk if you do not keep up mortgage repayments. This means that it is strongly recommended that you discuss your individual circumstances with a financial advisor before going ahead.
Getting two mortgages on 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% 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% and the deposit is 25%, the second mortgage will be 15%;
- have a fixed repayment period, usually up to 15 years or the owner’s retirement age;
- have a higher interest rate, typically 1% higher than the first mortgage.
Swiss mortgages for foreign buyers
Foreigners can freely apply for 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).
To apply for a mortgage in Switzerland, you’ll need to have the appropriate Swiss residence permit.
Can you qualify for a mortgage in Switzerland?
If you live 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.
If you don’t have residency, it’s slightly more complicated. Under the Lex Koller law – which limits purchases of Swiss property by foreigners – non-residents must apply for a license to buy from their cantonal authority. There are also restrictions on secondary home purchases in some areas.
The law also states that non-resident citizens can only buy investment properties for vacation purposes, and some cantonal authorities place quotes on the number of flats and apartments that can be bought in the area.
To get a mortgage as an expat in Switzerland, you must prove your residence, how you’ll afford repayments, and evidence of your deposit.
Swiss mortgages: how much can you borrow?
Lenders in Switzerland typically require a monthly income three times more than the amount necessary to repay your mortgage.
However, Swiss banks often also include maintenance or insurance charges in this calculation. The level of income you require may be higher than elsewhere for a mortgage of the same value.
Example loan calculation
|Property value:||CHF 700,000|
|20% deposit:||CHF 140,000|
|Interest at 5% (sample rate):||CHF 28,000 per year / CHF 2,333 per month|
|Principal repayment at 1% of loan amount per year:||CHF 5,600 per year / CHF 466 per month|
|Upkeep at 1% of purchase price:||CHF 7,000 per year / CHF 583 per month|
|CHF 40,600 per year / CHF 3,383 per month|
If you multiply this by three, that means you’d need 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 you’re paid 13 times, you should apply using your annual salary – rather than your monthly take-home pay – as lenders typically base their calculations on 12 payments a year.
- Whether the minimum salary you require is gross (before tax) or net (after tax).
- Whether you can afford other living costs, such as charges for shared services or communal areas (known elsewhere as service charges). In Switzerland, such charges often apply to detached houses as well as apartments, and cover communal parking areas, private roads, and similar maintenance issues.
- Whether you have enough budget for the additional costs of purchasing a home, which in Switzerland is typically around 5% of the purchase price. Your mortgage loan cannot be used to pay these fees.
The cost of getting a Swiss mortgage
When buying a home, you will usually need to pay property transfer tax (known elsewhere as stamp duty), which is payable in part to the canton and in part to the commune. Most cantons in Switzerland charge stamp duty, though six (Aargau, Glarus, Schaffhausen, Uri, Zug, and Zurich) choose to instead charge change of ownership fees and registration fees.
How much property transfer tax you’ll need to pay varies from region to region. As an example, transaction tax in Geneva costs 3%, while in the Ticino canton it only costs 1.1%.
You can find out the rates for your area by entering the name of your canton on the Swiss government website.
You will also have to pay fees to a notary (legal advisor) to process the administrative formalities of your purchase, such as transferring the deeds.
An example of purchase costs in Geneva
- Notary fee: 0.2%–0.3%
- Transaction tax: 3%
- Land Registration fee: CHF 1,000
- Registration of mortgage: 1% of mortgage amount
In Switzerland property is treated as an asset, meaning it is subject to both wealth and income tax. The property’s representative rental value is added to your taxable income.
Mortgage interest, maintenance costs, and indirect amortization in connection with your 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, home loans are typically arranged directly with the lender – which is 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 to request information on rates, and you may need to complete the paperwork in person.
If you are buying a house with a spouse, both parties will need to sign documents, often at the same time and usually in person.
Most Swiss cantons have their own cantonal bank. These only operate within the canton, will often not accept clients who are not resident in the canton, and will expect to transfer clients to another cantonal bank if they move away.
If you’re moving between cantons, it’s worth checking whether this will affect your mortgage.
Types of Swiss mortgages
The specific product details vary between lenders, 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.
Interest-only mortgages (where you pay the interest only during the life of the mortgage loan and the capital at the end) and 100% mortgages (where no deposit is required) are rare or non-existent in Switzerland.
For more information, consult Hausinfo (in German).