Real-estate and mortgage loans: financing a home in Switzerland

• How do institutions assess a real-estate project in Switzerland?
• Equity and personal contribution: how the 20% rule works
• What are the different real-estate loan models available in Switzerland?
• Long-term decisions: rate, term, amortization and taxation
• How do you prepare and submit your mortgage application?

It is hard to reduce the purchase of your future home to simply obtaining bank approval. Behind a real-estate loan or a mortgage loan, the thinking is broader: it includes your financial situation, the coherence of your project, and your ability to sustain it over time.

This guide aims to help you understand the key mechanisms of Swiss real-estate financing, decode what financial institutions expect, and make informed choices, far beyond a simple file validation.

How do institutions (banks or insurers) assess a real-estate project in Switzerland?

For a bank or a lending institution, reviewing a real-estate loan application is not limited to a list of documents or an automatic calculation. In fact, lenders’ objective is to assess the stability and coherence of your financial situation. That is why income regularity matters, of course, but it is never examined in isolation. It is put into perspective with your professional track record, your level of expenses, your existing assets, and your ability to absorb future variations.

In practice, institutions often apply standardized prudential criteria, based on theoretical interest rates that are higher than market rates. As a result, housing-related costs (interest, amortization and maintenance costs) are compared with income to ensure that the financial balance remains healthy over time. This approach explains why an application can be rejected despite seemingly affordable monthly payments at the current rate.

Another key point: the logic of the project itself. Real-estate financing is viewed favorably when it fits into a long-term vision. The type of property, its use (primary residence, investment), its location, and its fit with your personal situation are all factors taken into account.

Finally, institutions pay particular attention to the overall balance. A mortgage loan deemed “acceptable” is not the one that maximizes your borrowing capacity, but the one that allows you to retain sufficient financial headroom, today and tomorrow. This conservative approach explains the robustness of the Swiss mortgage system… and the selectivity of its criteria.

Equity and personal contribution: how the 20% rule works

In Swiss real-estate financing, equity refers to the assets that the buyer can mobilize to contribute to financing their home, without borrowing.

This naturally includes funds available in savings or personal accounts, and is complemented by securities investments as well as certain valuable assets (jewelry, works of art, collectible vehicles…). Cashing in an insurance policy or owning a building plot free of any mortgage can also be taken into account.

Equity can also be supplemented by family contributions, in the form of advances on inheritance or gifts. Pillar 3a assets are also an integral part of equity and can be used in full for the purchase of a home for personal use.

All these elements constitute what is known as “hard” equity, meaning immediately available. Alongside it exists “soft” equity, whose use is regulated. This is notably the case for early withdrawals of second-pillar pension assets, which can only be mobilized partially in the context of a real-estate purchase.

Beyond the amount, the composition of equity plays an important role in the application assessment. Immediately available funds strengthen the project’s solidity and can facilitate the negotiation of mortgage terms. Conversely, a personal contribution based largely on pension assets entails specific constraints and sometimes reduces future flexibility.

In practice, financing an apartment or a house almost always relies on a combination of equity and borrowed capital. In Switzerland, it is generally accepted that 20% of the property’s market value must be financed with equity, while the remaining 80% can be financed by a mortgage.

A mortgage is structured in 2 ranks (1st and 2nd rank):

• The first-rank mortgage covers up to two thirds of the purchase price and is not subject to an amortization requirement;
• The second-rank mortgage, by contrast, must be amortized progressively, generally over a maximum period of fifteen years.

To return to equity, at least 10% of the purchase price must come from “hard” equity, and the additional 10% can, where applicable, be made up of an early withdrawal from the second pillar. When the contribution consists only of this minimum “hard” equity, the mortgage can then cover up to 90% of the purchase price, as “soft” equity is not intended to reduce the amount of the mortgage loan.

What are the different real-estate loan models available in Switzerland?

The fixed-rate mortgage

The fixed-rate mortgage provides full visibility over the chosen term, with an interest rate set in advance and remaining unchanged throughout the contractual period. This model is particularly suitable for buyers who prioritize security and want to anchor their financing in a predictable framework, without depending on market fluctuations.

The variable-rate mortgage (indexed to SARON)

The SARON mortgage is based on a reference rate from the Swiss money market, adjusted regularly. By choosing this option, you benefit from periods of low rates, while accepting some exposure to market fluctuations.

This type of real-estate loan is more suited to profiles comfortable with some flexibility and with sufficient financial headroom to absorb potential increases. It is often chosen with a view to actively monitoring the financing. This model can be attractive during transitional phases, for example while waiting to lock in a fixed rate or as part of a short-term financing strategy.

The combined mortgage

The combined mortgage, often also referred to as a mixed rate, offers strong contractual flexibility. It brings together the advantages of fixed-rate and variable-rate mortgages.

This solution allows, for example, splitting the mortgage into 2 tranches: the first at a fixed rate for 5 years and the second at a variable rate for the following years.

Long-term decisions: rate, term, amortization and taxation

In real-estate financing, the interest rate cannot be analyzed in isolation. The mortgage term, the amortization method and their tax effects form a coherent set, which influences the project’s balance over the long term.

• The loan term determines both the stability of the conditions and future flexibility. A shorter commitment makes adjustments easier, while a longer term helps secure a framework over several years.
• Amortization determines how the principal is repaid over time. It can be done directly, with a gradual reduction of the debt, or indirectly, via pension solutions.

These parameters also influence the taxation of the financing because, in Switzerland, mortgage interest is in principle deductible from taxable income, which changes the real cost of the loan. The chosen combination of term, rate and amortization should therefore be assessed as a whole, taking into account the personal situation and its likely evolution.

How do you prepare and submit your mortgage application?

Creditworthiness analysis and processing of the application

Once the application is submitted, creditworthiness is assessed based on income, expenses and financial history. The review also focuses on the overall coherence of the project and its robustness under different scenarios, which makes the clarity of the financial situation decisive.

Finalizing the financing and securing the agreement

Once the loan offer has been established, it must be reviewed carefully, since the proposed conditions commit the borrower over the long term.

The finalization phase also involves legal validation, generally handled by a notary. The notary ensures compliance of the mortgage contract and the smooth completion of the real-estate transaction, up to the final signature.

This final step marks the completion of the financing process, and makes it possible to secure the agreement.

You can now use our free online calculator to estimate your borrowing capacity and most of the details of your potential mortgage loan..