Glossary

A B C D E F I L M N P R S T U V

Affordability: Your financial capacity refers to your ability to sustainably cover all costs related to your home (interest, amortisation, maintenance, other debts) without jeopardising your budget or exceeding the debt limits set by banks and insurance companies.
Alienation: Act of transferring ownership of an asset (sale, donation, exchange) or assigning a real right; in a mortgage, an alienation often implies bank conditions (e.g., consent, assumption, or repayment of the loan).
Amortisation schedule: The amortisation schedule is the detailed table that shows, year after year, how your mortgage debt decreases thanks to the repayments you make. It specifies the share of interest and the share of principal (amortisation) included in each instalment, as well as the remaining loan balance.
Amortization: Amortization is the gradual repayment of the borrowed principal, distinct from the payment of interest.
Application fees: The application fees are the costs charged by the bank to review your file, set up the mortgage, and put the contract in place.
Authentic deed: Deed drafted and signed before a notary (or a competent authority), with enhanced evidentiary value and legal force. In Switzerland, real-estate sales and the creation of real-estate pledges require an authentic deed.
Building insurance: Building insurance (often fire + natural hazards) covers the property against certain major losses such as fire, lightning or flooding.
Cancellation (mortgage note): Removal of a mortgage note registered in the Land Registry when the secured debt has been repaid. Cancellation ends the corresponding real-estate pledge and releases the property from this security.
Capital appreciation: Capital appreciation refers to the increase in a property’s value over time. This potential capital gain adds to the rental yield and plays a major role in building wealth.
Capital gain: A capital gain is the profit realized when reselling a property at a sale price higher than the purchase price (adjusted for investments). In Switzerland, real-estate capital gains are often subject to a specific tax that varies by canton.
Cash flow: Rental cash flow is the amount of cash left after paying all property-related expenses (interest, amortisation, charges, maintenance costs, and taxes on rental income). Positive cash flow means the property is self-financing and generates a monthly surplus.
Combined mortgage: A combined mortgage, also called a mixed rate, is a mortgage (loan) that splits your debt between a fixed-rate tranche and a variable-rate tranche, often linked to SARON, in order to balance stability and flexibility.
Condition precedent: Clause inserted, for example, in a real estate purchase agreement according to which the transaction becomes final only if a specified event occurs, typically the approval of your mortgage loan. If the condition is not fulfilled within the agreed timeframe, the contract is cancelled without penalty for the buyer. It therefore secures your acquisition by limiting your financial risk.
Condominium service charges: Condominium service charges cover a building’s shared expenses: maintenance of common areas, the building envelope, parking, central heating, administration and property management.
Construction interest: Interest due during the construction or renovation phase on the amounts actually drawn from the construction loan. It is often paid as you go, then included when the loan is consolidated into a definitive mortgage.
Construction loan: A construction loan is a specific form of property financing used to pay, step by step, for construction, conversion or renovation works on a property.
Construction site insurance: Construction works insurance, often referred to as site insurance or construction all risks insurance, is a policy that protects a real-estate project throughout the entire construction phase, whether it is a new build, a major conversion or a significant renovation.
Debt-to-income ratio: The debt-to-income ratio indicates the share of your income used to repay your debts, in particular the mortgage charges linked to buying your home with a mortgage loan. In Switzerland, this ratio is one of the key indicators used by banks, insurers and pension funds to assess whether your real estate project is sustainable in the long term for your budget.
Deduction of maintenance costs: Maintenance costs (tax deductions) cover work and expenses intended to preserve the value of your property (repairs, minor renovations, routine upkeep). In Switzerland, part of these costs can be deducted from taxable income—either as a flat-rate allowance or based on actual expenses, depending on the canton.
Direct amortisation: Direct amortisation means repaying each year part of your mortgage principal, in addition to interest, so that your debt gradually decreases.
Down payment: The down payment is the share of the property price that you finance without borrowing, using your savings, your 3rd pillar, family gifts, an advance on inheritance, or by pledging your 2nd pillar.
Early repayment penalty: Charge applied when a mortgage—especially a fixed-rate mortgage—is terminated or repaid before maturity (exit fee). It compensates the lender for the financial loss, noting future interest that would have been earned. The amount depends on factors like remaining term, market rates, and the contract.
Easement: An easement is a right recorded in the land register that allows a third party (neighbour, public authority, energy provider) to partially use your property (or allows you to use a neighbour’s property) or to restrict its use. For example, it may be a right of way or a building restriction. The easement remains attached to the property even in the event of a change of ownership, as it is registered in the land register, and it may affect the property’s value or development potential.
EPL: LPP capital can, in some cases, be withdrawn to buy your own home. The Federal Social Insurance Office describes this process in detail. All details about EPL are set out in the ordinance on the promotion of home ownership through occupational pension schemes.
Falling rates: A fall in mortgage rates reduces the cost of new loans and creates refinancing opportunities for existing loans. It can improve your home-buying power or your rental yield.
FINMA: Switzerland’s regulator overseeing banks, insurers, and financial intermediaries (Swiss Financial Market Supervisory Authority). It enforces financial-market rules, protects creditors and investors, and supports overall financial stability. It also issues regulatory guidance (e.g., circulars) and can take supervisory action.
Fixed rate: A fixed mortgage rate is an interest rate that remains the same for the entire term of the mortgage contract. Interest charges do not change, even if market rates rise or fall.
Fixed-rate mortgage: A fixed-rate mortgage is a mortgage with an interest rate that remains the same for the entire term of the mortgage contract. Interest charges do not change, even if market rates rise or fall.
Imputed rental value: Imputed rental value is a notional income attributed to an owner-occupier and added to taxable income as if the owner were receiving rent.
Income property: An income property is a building or apartment purchased mainly to generate rental income. The bank’s analysis focuses on the property’s ability to cover costs (interest, maintenance, amortization) and on the stability of rents.
Indirect amortisation: With indirect amortisation, you do not repay the capital to the bank immediately. Instead, you make regular payments into a pledged pension or savings product, which will be used to repay the mortgage at maturity.
Insurance mortgage lender: In Switzerland, some insurance companies offer mortgages in addition to, or as an alternative to, banks. They therefore become mortgage lenders, with their own conditions on rates, term and amortisation.
Investment horizon: The investment horizon corresponds to the period during which you expect to keep your property and your mortgage (for example 5, 10 or 20 years). This timeframe influences the choice between fixed rate, SARON, contract term and amortization strategy.
Land Registry: Public office that officially records buildings and land, their owners and real rights (mortgages, easements, pledges). Any registration of a mortgage or a mortgage note must go through the Land Registry.
Land registry fees: Land registry fees (often referred to as Land Registry charges) are the amounts billed to officially register actions related to your property purchase in the Land Registry (in particular the transfer of ownership and, very often, the registration of a mortgage note or other real rights); how they are calculated depends on the canton.
Lender: In the context of a mortgage loan in Switzerland, the lender is generally a bank, an insurance company, or a pension fund.
Lending bank: The lending bank is the institution that grants you the mortgage, assesses your file, sets the terms (rate, term, amortization) and manages the loan over time. In some cases, an insurance company can be the lender.
Leverage effect: The leverage effect refers to using debt, in your case a mortgage, to finance a large share of a real estate investment while contributing only a fraction of the price with your own funds. Thanks to leverage, the yield you generate on your own capital can be higher than the property’s “gross” yield.
Limited real right: A right directly attached to a thing (e.g., real estate), but with a more limited scope than full ownership. Real-estate pledges (mortgages, mortgage notes), easements or land charges are limited real rights.
Maintenance costs: The maintenance costs are the expenses needed to keep your home in good condition: minor repairs, painting, heating system checks, etc.
Minimum amortisation: The minimum amortisation rate stems from the rule requiring you to bring your debt down to 65 % of the property value within 15 years (or before retirement).
Mixed rate: A mixed rate is a combined mortgage, also called fixed+variable, that splits your debt between a fixed-rate tranche and a variable-rate tranche, linked to SARON, in order to balance stability and flexibility.
Money market: The money market refers to the segment of the financial markets where short-term funds are traded, generally for periods of less than one year. It plays a central role in setting the mortgage interest rates used in particular for certain mortgages in Switzerland.
Mortgage: A mortgage is the financing you obtain to buy or renovate a property, generally in the form of a mortgage secured on the property.
Mortgage broker: A mortgage broker is an independent intermediary, free for you, who compares offers from different banks and insurers (lenders) to find the best financing terms for your home purchase project.
Mortgage certificate: A mortgage deed is a legal document (paper or registered) that formalizes the debt secured by your property and outlines the main terms of your loan. It is a legal document.
Mortgage debt: The outstanding amount you still owe the lender under a mortgage, together with the interest terms set in the contract (outstanding mortgage balance). It is secured by a charge/pledge on the property and, in Switzerland, is often structured into 1st and 2nd mortgage tranches. The balance decreases as you amortize.
Mortgage interest deduction: In Switzerland, the mortgage interest you pay on your home loan is generally deductible from your taxable income. This rule applies to both primary residences and certain rental properties.
Mortgage rate curve: In the Swiss mortgage market, the rate curve graphically shows mortgage interest rates by term (1, 3, 5, 10 years, etc.).
Mortgage type: The mortgage type refers to the structure of your financing: fixed rate, variable rate SARON, mixed rate, or split into tranches (ranks). Each mortgage type has a different risk, flexibility and cost profile for the borrower.
Notary: The notary is a public official responsible for authenticating legal acts, in particular when purchasing real estate, making a gift or organising an estate. In Switzerland, the notary checks that the transaction complies with the law, protects the interests of the parties and ensures that the process runs smoothly until registration in the land register.
Notary fees: Notary fees (sale deed, strictly speaking) include the notary’s fees/honoraria related to the sale deed, VAT where applicable, and disbursements (copies, extracts, administrative fees, mailings). These fees often range between ~0.1% and ~0.7% of the purchase price depending on the canton and the case.
Pledging assets as collateral: Pledging assets as collateral means offering an asset (for example a pension account, securities or cash) to your bank as security, without transferring ownership immediately. If you default on your mortgage payments, the lender can realise this collateral to cover the outstanding debt.
Policy rates: Policy rates are the interest rates set by the central bank (in Switzerland, the SNB) to steer monetary policy. They directly influence money-market rates (SARON) and, indirectly, the mortgage rates offered to households.
Primary residence: A primary residence is the home you occupy as your main and usual dwelling. In Switzerland, it benefits from specific rules for mortgage financing (equity requirements, amortization) and taxation (imputed rental value, deductions).
Property gain: The property gain is the positive difference between a property’s sale price and its acquisition cost, increased by eligible investments and costs (works, selling costs, brokerage commission, etc.). In Switzerland, this gain is subject to a real-estate gains tax, generally levied by the canton upon sale.
Property pledge: Under Swiss law, the real estate pledge is a legal security that the bank takes over a property (house, apartment, building) to secure the repayment of a mortgage loan. Concretely, the real estate pledge is a limited right in rem recorded in the land register: it encumbers the property and secures a claim (for example your mortgage).
Property transfer tax: The property transfer tax is a tax levied when ownership of a property is transferred, i.e., when the home officially changes owner in the land register.
Purchase costs: Purchase costs refer to all the additional costs that are added to the purchase price of a property at the moment you become the owner.
Real estate appraiser: The renovation fund (or reserve fund) is a shared pool funded each year by co-owners to finance major upcoming works (façade, roof, lift, etc.) in a condominium (PPE).
Renovation fund: The renovation fund (or reserve fund) is a shared pool that co-owners contribute to each year to finance major upcoming works (façade, roof, lift, etc.) in a condominium (PPE).
Rental vacancies: Periods during which a dwelling or building is unoccupied and generates no rent. They reduce rental income and can put pressure on cash flow and mortgage debt service.
Restriction on disposal: Land Registry note/encumbrance that limits or conditions the sale/assignment of a property (e.g., subsidized housing, a right of first refusal, or a clause linked to public aid); it can complicate a sale and is a point of attention for the lender.
Right of residence: Real right granting a person the right to live in a dwelling (without being able to derive income such as renting it out), often registered in the Land Registry; it can reduce the realizable value of the property for the bank.
Risk premium: The risk premium is the additional margin the bank adds to the base rate (SARON, swap, etc.) to cover credit risk and its costs. It depends in particular on your financial situation, the property being financed and regulatory requirements.
Sale deed: A sale deed is the written contract by which the seller and the buyer formally record the real-estate transaction. In Switzerland, it must be executed in authentic form by a notary or a competent public officer and signed by both parties. Based on this deed, the transfer of ownership is then registered in the Land Registry.
Secondary residence: A secondary residence is a home you do not occupy permanently (chalet, holiday apartment, etc.). Banks often require more equity and may apply stricter rate conditions than for a primary residence.
Sight deposits: In the terminology of the SNB, sight deposits essentially refer to the balances that banks (and a few other account holders) keep in their giro accounts at the SNB. These are immediately available funds (“at sight”) used in particular for banks’ liquidity and CHF payment traffic. In its statistics, the SNB distinguishes, among other things, between the giro account balances of banks in Switzerland and other sight deposits/liabilities (Confederation, non-residents, etc.).
SNB: The SNB (Swiss National Bank) is Switzerland’s central bank. It sets policy rates, conducts monetary policy and thereby influences mortgage interest rates, the evolution of SARON and real-estate financing conditions.
Sustainable construction: Sustainable construction aims to reduce a building’s environmental footprint across its entire life cycle, for example through the choice of materials, energy efficiency, water management, and how it integrates into its site. It may benefit from subsidies and favourable financing terms.
Swap: In the context of mortgage rates, an interest rate swap is a financial contract between the bank and its counterparties that allows it to convert a variable rate into a fixed rate (or vice versa). Banks use CHF swap rates at different maturities as a benchmark for setting their fixed mortgage rates.
Tax deductions: Tax deductions are amounts you can subtract from your income (and sometimes from certain assets) before your tax is calculated. They relate to recognized expenses (e.g., mortgage interest, maintenance costs, work-related expenses) and reduce taxable income, therefore lowering the tax due. In Switzerland, the rules and limits vary depending on the tax level (federal/cantonal/communal) and the canton.
Taxable income: Taxable income is the portion of your income (salary, rental income, etc.) subject to tax after deductions. In Switzerland, mortgage interest and certain property-related costs (maintenance, renovation) can reduce taxable income in some cantons.
Term premium: The term premium is the extra rate cost charged by the bank for a long-term mortgage compared with a short-term one. It compensates for the risk of committing over several years (uncertainty about rates, inflation and the real-estate market).
Theoretical mortgage costs: Theoretical mortgage costs are a conservative estimate of the future cost of your mortgage: interest calculated at a higher rate (e.g., 4.5–5%), mandatory amortisation and maintenance costs. This calculation does not necessarily reflect your current actual payments, but a stress scenario lenders use to assess your affordability.
Tranche maturity: Date on which a mortgage tranche (e.g., fixed for 5 years) reaches its end and must be renewed, converted (new tranche/rate) or repaid, depending on the agreement with the bank.
Transfer of ownership: The transfer of ownership is the legal moment when ownership of a property moves from the seller to the buyer, typically upon registration in the Land Registry. It triggers, among other things, the due date of certain costs (transfer duties, notary fees) and the effective set-up of the mortgage.
Usufruct: Real right allowing a person to use a property and receive its income (e.g., rents) without owning it; in financing, this affects affordability and the ownership structure.
Variable rate (SARON): A variable mortgage rate is an interest rate that changes regularly based on the SARON reference rate, to which the bank adds a margin. Your interest charges can therefore increase or decrease over time, depending on how market rates evolve.
Variable-rate mortgage: A variable-rate mortgage is a mortgage with an interest rate that changes regularly based on the SARON reference rate, to which the bank adds a margin. Your interest charges can therefore increase or decrease over time, depending on how market rates evolve.