Amortisation schedule: definition
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.
How does an amortisation schedule work in Switzerland?
In the context of a mortgage in Switzerland, the amortisation schedule generally distinguishes two components:
- interest (the cost of the borrowed capital),
- amortisation (repayment of the principal).
Over time, the interest portion decreases as the debt is reduced, while the outstanding principal gradually goes down.
In practice, lenders often require that the second mortgage (the part above 65 % of the property value) be amortised within a maximum period of 15 years or until retirement age. The amortisation schedule therefore allows you to clearly visualise your debt reduction path.
Direct or indirect amortisation: what is the impact on your amortisation schedule?
With direct amortisation, you regularly repay part of the principal to the bank. Your debt effectively decreases every year, which mechanically reduces your future interest charges. Your amortisation schedule then shows a steady and visible decline in the mortgage balance.
With indirect amortisation, you pay the planned amounts into a pension arrangement (often a 3rd pillar pledged in favour of the bank). The debt remains stable over the term of the contract and is then repaid in a single lump sum using the accumulated capital. In this case, the amortisation schedule shows a constant debt level until the final repayment.
Why should you analyse your amortisation schedule carefully?
The amortisation schedule is a strategic tool: it helps you anticipate your financial burden over time. You can assess how your interest costs evolve, measure the impact of an early repayment or compare different scenarios (shorter term, different interest rate, change of strategy).
For example, with a mortgage of CHF 800’000.– and annual amortisation of CHF 10’000.–, you reduce your debt to CHF 700’000.– in ten years (assuming unchanged interest rates). This decrease directly affects your future interest payments and your affordability. Analysing your amortisation schedule therefore allows you to make well-informed decisions that are consistent with your investment horizon and your tax situation.
Useful resources about your amortisation schedule
- Mortgage amortisation: explanations and calculations
- Debt ratio: determine your borrowing capacity
- Real estate investment strategies
