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In Switzerland, a mortgage is a long-term loan granted by a bank, an insurance company or a pension fund to enable you to finance the purchase of a property. In reality, the term mortgage refers not only to the loan itself but above all to the security interest granted to the bank:


  • If the loan is not repaid, the lender has the right to sell the property in order to recover its capital. This is why we speak of a mortgage loan.
  • Fixed-rate, SARON or variable mortgage: you can choose between three types of interest rates to repay your loan.
  • To obtain a mortgage, you must meet certain conditions, including sufficient personal funds and a financial capacity that complies with the one-third rule.

What are the different types of mortgage in Switzerland?

When you take out your loan, you must choose your type of mortgage interest rate. This choice depends on your risk appetite: do you prefer the stability and security of a fixed rate, or the potential savings that a SARON rate can offer?


The fixed-rate mortgage

By choosing a fixed-rate mortgage, you benefit from fixed interest rates for a set term, usually between five and fifteen years. With this option, you know exactly how much you will pay each month, since this type of loan is not affected by changes in the key interest rate set by the Swiss National Bank (SNB).


The SARON mortgage

The SARON (Swiss Average Rate Overnight) is a variable rate directly linked to the monetary policy of the SNB. With this type of mortgage, the interest is recalculated periodically, which creates a direct link with the Swiss economic situation.


The main advantage lies in generally lower costs in the short term, as well as greater flexibility to adjust your strategy.


The variable-rate mortgage

Today, this model is almost obsolete in Switzerland because of its disadvantages compared with SARON. It is indeed more expensive and often less attractive, as it offers little visibility without the benefits of either of the other two options.


Borrowers who are looking for a competitive and transparent interest rate tend to choose SARON, while those who are looking for security opt for a fixed rate. The classic variable rate no longer offers an attractive compromise, as it is expensive and its fluctuations are less transparent than those of SARON.


What are the conditions for obtaining a mortgage?

Equity (personal funds)

You must provide a minimum personal contribution of 20% of the purchase price of the property in order for your application to be considered by the banks.


At least half of this must come from "hard" equity, i.e. cash, savings, securities or irrevocable gifts.


The other half may come from "soft" equity, such as occupational pension assets from the 2nd pillar (via withdrawal or pledge), 3rd pillar pension assets, or even structured family support.


For banks, this combination is a real guarantee of security: hard equity creates a stable base, while soft equity allows you to increase your financing margin without jeopardising your future affordability.


Calculating financial capacity

The assessment is based on a theoretical charge calculated using a standard interest rate of 5%, to which amortisation and maintenance costs are added. Note that the total must not exceed one third of your gross income. On top of this come the repayment costs (amortisation) and maintenance costs (estimated at 1% of the property’s value).


Good to know: the bank cannot grant you a mortgage if you do not comply with the one-third (or 33%) rule. This measure ensures that the repayment burden remains sustainable for you, even in the event of a significant rise in interest rates.


Mortgage ranks and amortisation obligations

In Switzerland, mortgage financing is divided into two parts, or “ranks”, which define priorities and repayment obligations:


  • First mortgage (1st rank): finances the part considered safest for the lender, up to 65% of the property’s value. Amortisation (repayment of the principal) is not compulsory on this portion; you can keep it indefinitely.

  • Second mortgage (2nd rank): covers the remaining portion of the loan, from 65% to 80% of the property’s value (maximum 15% of the purchase price). This part is considered riskier for the bank and must be fully amortised within a maximum of 15 years, or at the latest by retirement age.

What are the steps to obtain a mortgage in Switzerland?

Required documents

Banks require documents that allow them to assess the stability of your income, your creditworthiness and the origin of your equity. Among the documents frequently requested are:


  • salary certificates

  • extract from the debt collection register

  • recent tax returns

  • bank statements

  • pension fund statements

  • employment contracts or proof of variable income

Note that the exact list of documents depends primarily on the lender!


The steps to release a mortgage

Once your file has been compiled, the lending institution is able to build a risk profile and adjust its offer accordingly.


Valuation of the property

Once your financial situation has been pre-approved, the lender assesses the property itself to ensure that the purchase price is fair and realistic:


  • Market value: the property is compared with similar properties recently sold in the same area.

  • Property quality: its structural condition, maintenance level and location are taken into account.

This valuation determines the value used by the bank for financing. If the purchase price is considered too high, the bank will base its loan on its own valuation.


The decision and the financing offer

If the property valuation confirms that the project is viable, the institution submits a detailed loan offer. This sets out all the parameters of the loan:


  • the amount and type of mortgage (fixed, SARON, etc.)

  • the contract term and proposed interest rate

  • the amortisation plan (how you must repay the 2nd mortgage)

Final signing of the mortgage

This is the moment when you sign your contract, making the financial agreement legally binding. From then on, you commit to complying with the terms and payment schedule, and the bank undertakes to disburse the funds at the time of purchase.


How can you optimise the financing of your mortgage?

The Swiss pension system offers powerful levers to structure your financing and adjust your savings effort.


Using the 2nd pillar (BVG/LPP)

Your 2nd pillar can be used in two ways.


Early withdrawal

You draw directly from your occupational pension to increase your equity. The debt is reduced and the interest burden falls. In return, your retirement capital decreases and you pay a one-off tax at the time of withdrawal.


Pledging

The bank takes your 2nd pillar assets as collateral without withdrawing them. You therefore keep your retirement capital and future benefits. However, the debt remains higher, which increases the theoretical affordability burden.


You are therefore arbitrating between immediate liquidity, maintaining your old-age provision and your tax balance: early withdrawal frees up capital but reduces your future pension, while pledging preserves your pension assets but increases the pressure on your current budget.


The 3rd pillar

Your 3rd pillar is used mainly for indirect amortisation. Your contributions are paid into an account or insurance policy pledged to the bank. This way, you keep the tax deduction and accumulate capital intended to repay the debt later on. The mechanism operates on three levels:


  • a reduction in your tax burden thanks to deductible contributions

  • regular capital accumulation

  • stabilisation of your financing, as the debt is eventually offset by the accumulated capital

  • This mechanism structures your loan and organises your savings effort along a clear and predictable path.

Do you have a purchase project and want to apply for a mortgage?

dreamo.ch offers, for all properties for sale, a financial capacity calculator accessible via the "Financing" button on the page of the property you are interested in.