5 Steps to Get Your Mortgage Approved
Getting a mortgage loan to finance a property in Switzerland can be a complex process. Here, we present the five key steps to help you finance a property in Switzerland and navigate the process with confidence.
Prepare your financial documentation
Proof of income
Proof of income is one of the most important mortgage steps when preparing your mortgage loan application. Lenders—whether banks or insurance companies—require detailed documentation to assess your household’s financial stability. Required documents include your payslips from the past three to six months, which show your regular income. You must also provide your most recent tax return, which gives an overview of your annual income and tax obligations.
Sometimes, lenders will also ask for a copy of your current employment contract, especially if you’ve recently changed jobs or work in a field where income can fluctuate. These documents help lenders ensure that you have a stable and sufficient source of income to repay the mortgage loan.
Asset declarations
In addition to proof of income, you must also provide detailed asset declarations. This includes statements from your bank accounts, showing current balances and recent transactions.
If you have investments such as stocks, bonds, or mutual funds, you’ll need to submit those account statements as well. Statements from retirement accounts, such as the 3rd pillar or 2nd pillar, are also important, especially if you plan to use these funds for your down payment.
Finally, if you own other assets, such as additional properties or valuable vehicles, proof of ownership and recent appraisals may be required. This information helps lenders evaluate your overall financial strength and your ability to meet repayment obligations.
The importance of financial documentation
Thorough preparation of your financial documentation is essential to maximize your chances of financing a property in Switzerland. Swiss banks and insurers are known for their rigor and meticulousness when evaluating borrowers’ financial health. At this stage of the mortgage process, preparing means gathering all necessary documents and ensuring they are current and complete. Well-organized and accurate documentation makes the loan application process smoother and reduces the risk of delays or rejection.
By making sure every aspect of your financial situation is clearly documented, you demonstrate to lenders that you are a serious and reliable candidate for a mortgage loan. This thorough preparation lays the groundwork for a trusting relationship with your lender and paves the way for a smoother, more efficient loan application process.
Determine your budget and financial capacity
Calculating financial capacity
To finance a property in Switzerland, it is essential to fully understand your financial capacity. Swiss banks impose strict criteria to ensure that borrowers can bear the housing costs without compromising their financial stability. As a general rule, the total housing costs—including mortgage payments, property taxes, insurance, and maintenance—should not exceed one-third of the borrower’s gross annual income. This means that if your gross annual income is CHF 120,000, your housing costs should not exceed CHF 40,000 per year. This calculation helps banks assess your ability to manage your financial obligations sustainably.
Down payment requirements
One of the key requirements for financing a property in Switzerland is the initial contribution, also known as the down payment. Swiss lenders generally require a minimum down payment of 20% of the property’s purchase price. For example, for a property valued at CHF 1,000,000, you will need to provide at least CHF 200,000 as a down payment. Of this amount, at least 10%—CHF 100,000—must come from your personal savings. The remaining 10% can come from retirement funds such as the 3rd pillar or 2nd pillar, under certain conditions. This requirement ensures that the borrower has a significant financial stake in the property, thereby reducing the lender’s risk.
Interest rates and amortization
Understanding interest rates and amortization is essential for planning your long-term financial commitments. Interest rates can be fixed or variable, each option having its own advantages and disadvantages.
A fixed rate remains unchanged throughout the term of the loan, providing stability and predictability in monthly payments. On the other hand, a variable rate can fluctuate based on market conditions, which may lead to higher or lower monthly payments over time.
Loan amortization typically spans a period of 10 to 25 years.
It is of utmost importance to choose an interest rate that matches your risk tolerance and long-term financial outlook when considering financing a property in Switzerland.
Strategic financial planning
Strategic financial planning is a key step in the mortgage process to determine a realistic budget and understand your long-term financial capacity. It is essential to establish a budget that considers not only the monthly mortgage payments but also other property-related costs, such as property taxes, insurance, and maintenance fees. Swiss lenders are known for their conservative approach, and they will closely examine your overall financial situation to ensure that you meet their strict criteria.
It is also recommended to maintain a financial reserve to deal with potential unforeseen events. By having a clear understanding of your finances and complying with lenders’ requirements, you increase your chances of obtaining a loan to finance a property and of effectively managing your long-term financial obligations.
Choose the right mortgage product
Fixed-rate mortgages
They offer stability through a fixed interest rate over a defined period, usually 5, 10, or 15 years depending on the lender. They allow for predictable payments and are therefore suitable for people who prefer financial certainty.
Read our full article on fixed-rate mortgage loans.
SARON mortgages
Linked to the Swiss Average Rate Overnight (SARON), these mortgages offer lower initial rates that can be adjusted periodically based on market conditions. This option can be advantageous when interest rates are expected to remain low.
For a detailed explanation, please refer to our article on SARON mortgage loans.
Mixed-rate mortgages
Combining elements of fixed-rate and SARON mortgages, mixed-rate mortgages allow borrowers to benefit from the stability of fixed rates while taking advantage of potentially lower SARON rates. This offers a balanced approach to risk and cost.
Customized mortgage selection
In the steps of a mortgage loan to finance a property, choosing the right mortgage product is essential. You need to understand your personal financial goals and risk tolerance. Consulting financial advisors or mortgage brokers provides tailored advice to meet your individual and specific needs.
Submitting the mortgage loan application
Application form
The first step in submitting an application to obtain a loan to finance a property is to complete the application form provided by the lender. It is imperative to fill out this form accurately and thoroughly. The required information includes your personal details, financial information, professional background, and details about the property you wish to purchase. Any omissions or errors can lead to delays or even rejection of the application. Make sure all information is correct and up to date.
Submission of documents
The submission of required documents is a crucial step in the mortgage loan process. You will need to provide proof of identity, such as a passport or national identity card. Necessary financial documents include recent bank statements, income statements, pay slips, and any other proof of income or assets. Property details must also be provided, including purchase price information, a description of the property, and any recent appraisal. Ensure all documents are clear, legible, and complete to avoid delays in processing your request to finance a property.
Creditworthiness check
Once your application and documents are submitted, the lender will perform a creditworthiness check. This step involves assessing your ability to repay the loan by reviewing your credit history, current debts, and financial background. The lender may also contact credit agencies to obtain detailed reports on your past financial behavior. A good credit standing increases your chances of receiving favorable approval for a mortgage loan to finance a property.
Efficient application management
To maximize the chances of your mortgage loan application being approved, efficient management of the submission is essential. This means ensuring that all forms are completed accurately, that all required documents are provided and properly organized, and that any additional information requested by the lender is supplied promptly. Attention to detail and thoroughness in document presentation are essential at this stage of the mortgage loan process. A well-prepared application to obtain a mortgage to finance a property shows lenders you are a serious and reliable borrower, which can positively influence their decision.
Finalizing the mortgage agreement
Reviewing the offer
Carefully reviewing the mortgage offer is a critical step to ensure a full understanding of the proposed terms. This includes a detailed analysis of interest rates, repayment schedules, monthly payment amounts, and any additional fees. It is essential to understand the long-term implications of these terms on your personal finances.
Legal consultation
Consulting a notary or legal advisor is essential for verifying the mortgage contract. Financing a property with a mortgage loan is a process that the notary or advisor will review. They will ensure that all legal requirements are met and that the terms of the contract comply with current legislation. This stage in the mortgage loan process ensures that your rights as a borrower are protected and that you fully understand your contractual obligations.
Signing the contract
Signing the mortgage loan contract in the presence of your legal advisor is the final step that formalizes the agreement between you and the lender. This formal procedure ensures that all parties understand and agree to the terms of the contract. The presence of a legal advisor provides added security in case of questions or potential disputes.
Notarial processing
The next step in the process is to prepare the mortgage contract at the notary’s office. The notary plays a key role in handling the real estate transaction. They will contact the lender to verify and adjust all necessary information to ensure that the sales contract is correct and complete. The notary will also ensure that all preconditions for the sale are met and that the documents are properly recorded.
In summary
Financing a property in Switzerland is a structured and rigorous process that requires careful preparation and strategic planning. By following these steps to obtain a mortgage loan to finance a property, you will make the process easier and get your loan approved more quickly.
Being supported by a mortgage broker is always a good solution because they are not tied to any specific lender. In fact, to obtain a loan and finance a property, they can offer mortgage options from various lenders, giving you access to more possibilities. Your broker will also assist you through all these steps and help you save time. Don’t hesitate to ask for the credentials of the mortgage brokers you are going to meet (example of training). Not all brokers will have the same skills!
