How to obtain a mortgage in Switzerland

A mortgage is a long-term loan provided by a bank or financial institution to finance the purchase of a house or apartment. To secure repayment, the property you purchase is used as collateral.

Your mortgage payments are calculated based on the loan's interest rate and amortization schedule. Interest rates can be fixed or variable, and the loan duration can also be fixed or flexible, depending on the terms agreed upon with your lender.

Interest rates in Switzerland have experienced fluctuations over the past few years, so staying informed about the current market conditions is crucial. Additionally, Swiss regulations require that your total housing costs — including mortgage interest, amortization, and maintenance — should not exceed one-third of your gross income. This affordability calculation is a key factor in the mortgage approval process.

In Switzerland, to secure a mortgage from a bank, you must contribute at least 20% of the property's purchase price from your own funds. This requirement applies across all Swiss cantons and municipalities. Having sufficient personal funds is essential when applying for a mortgage.

Your own funds can come from various sources, such as savings, the second pillar (occupational pension fund), the third pillar (private pension schemes or life insurance policies), gifts, or equity from an existing property.

At least half of the 20% down payment—meaning 10% of the purchase price — must come from savings other than your second pillar pension fund. In Switzerland, the second and third pillars are components of the professional pension system. It's important to note that personal funds cannot originate from loans or advances, even if your income could theoretically cover them.

For example, if you're purchasing an apartment priced at CHF 500,000, the bank would agree to lend you a maximum of 80% of the purchase price. This means the maximum mortgage amount would be CHF 400,000. You would need to provide at least CHF 100,000 from your own funds. Of this amount, at least CHF 50,000 must come from savings, while the remaining CHF 50,000 can come from other sources like your second pillar pension fund.

In addition to the 20% down payment, you should also budget for notary fees and property transfer taxes. These costs cover expenses related to the purchase deed and the mortgage note and can vary significantly from one canton to another. Additional costs may be incurred depending on where you decide to purchase the property. For instance, if you buy an apartment for CHF 500,000 in the canton of Geneva, notary fees and taxes can amount to nearly CHF 28,000.

Furthermore, the bank will assess your ability to repay the loan. They will ensure you can meet the repayment obligations without financial strain. Generally, in Switzerland, all housing-related costs — including mortgage interest, amortization, and maintenance — must not exceed 33% of your gross annual income.

Therefore, for an apartment costing CHF 500,000, your gross annual income should be greater than CHF 90,000 per year. Any existing debts and financial obligations will also be considered when evaluating your financial capacity.

After you've secured the required 20% down payment and confirmed that your income can comfortably cover mortgage payments and maintenance costs, you can schedule a meeting with a financial institution to discuss your mortgage options.

The bank can lend you up to 80% of the property's purchase price. In Switzerland, it's common practice not to fully amortize the mortgage, meaning that the loan is not repaid in full. This approach allows homeowners to maintain a level of debt, which can be advantageous due to tax benefits. Mortgage interest payments are tax-deductible throughout Switzerland. Regarding amortization, the portion of the loan exceeding two-thirds of the property's value must typically be repaid within 15 years or before reaching retirement age.

Purchasing a property and obtaining a mortgage will naturally impact your budget. You'll also incur additional expenses such as maintenance costs and the imputed rental value tax. However, Swiss tax laws allow you to deduct various expenses when filing your tax return, including mortgage interest payments and certain maintenance costs.

It's also worth noting that the monthly mortgage payments are often lower than the cost of renting a comparable house or apartment, especially in the current interest rate environment.

The main differences between Swiss citizens and foreign residents or non-residents lie in their rights to purchase property. Swiss citizens, whether living in Switzerland or abroad, have unrestricted rights to buy property on Swiss territory, provided they have sufficient funds. Foreigners residing in Switzerland can purchase property according to the conditions of their residence permits.

Holders of a C residence permit enjoy the same property purchase rights as Swiss citizens. Holders of a B residence permit from a European Union (EU) or European Free Trade Association (EFTA) country also have similar rights, allowing them to buy property for their own use.

However, holders of a B permit from non-EU/EFTA countries can purchase property solely for personal use and may face additional restrictions. Other individuals residing in Switzerland with different types of residence permits have the same rights as non-residents concerning property purchases.

In Switzerland, non-resident foreigners face significant restrictions when purchasing property, as they can become property owners only under specific conditions. Various laws limit their ability to buy real estate, and the options available depend on whether the non-resident originates from an EU/EFTA country or a non-European country.

Additionally, the number of holiday homes that non-resident foreigners can acquire is limited to 1,500 per year across the entire country. These quotas are distributed among cantons and municipalities with tourist potential.

If a foreigner has the right to purchase property in Switzerland, they can apply for a mortgage. However, approval is subject to certain conditions. Foreigners officially residing in Switzerland are generally subject to the same mortgage conditions as Swiss nationals. In contrast, non-resident foreigners can apply for a mortgage only under specific circumstances defined by each financial institution.

Each bank sets its own criteria for granting loans to non-resident foreigners. In addition to having sufficient funds, applicants must meet various requirements unique to each bank. Being an existing customer can significantly improve the chances of mortgage approval.

Banks will closely examine the applicant's ties to Switzerland:

• Do they have family connections?
• What is the purpose of the purchase?
• Do they spend significant time in Switzerland?

These factors can influence the bank's decision.

If you're looking to assess your financial capacity to purchase a house and cover the related costs, many banks offer online mortgage calculators. These tools allow you to quickly estimate how much you might be able to borrow, helping you take the first steps toward achieving your dream of homeownership—all in just a few clicks.