LTV ratio (loan-to-value) to obtain a property loan in Switzerland

• Loan-to-value and LTV ratio: one logic, two terms
• How the LTV ratio calculation works in practice
• What lenders look at behind the percentage
• Pledging, pension assets and equity: the pieces of the puzzle
• Two numerical scenarios to measure the mortgage leverage effect
• How to improve your file before requesting a mortgage
• Frequently asked questions about loan-to-value
• Would you like to know your real ratio?

The loan-to-value ratio is one of the shortest figures in your mortgage file, yet it can decide many things: the amount the lender is prepared to finance, the equity you need to bring, whether amortisation is required, your negotiating room and sometimes even the type of institution to approach. In international terminology, this is the LTV ratio, from the English loan-to-value ratio. In Switzerland, however, the most useful expression remains loan-to-value, because it refers directly to the value the bank accepts as security.

This guide explains how loan-to-value works in Swiss mortgage lending. The aim is not to recite a mechanical rule, but to show how this percentage is used in a real file, with its friction points: purchase price, property value accepted by the lender, equity, pension assets, affordability, property profile and the lender’s internal policy.

Loan-to-value and LTV ratio: one logic, two terms

Simple definition

Loan-to-value corresponds to the ratio between the mortgage amount and the lending value (the property value retained by the lender). If a bank finances CHF 520’000.– on a home it values at CHF 650’000.–, the loan-to-value is 80%. The formula is simple:

Loan-to-value = mortgage amount ÷ lending value × 100

In a standard residential purchase in Switzerland, the maximum financing often observed is around 80% of the value accepted by the lender. This means the buyer must in principle provide about 20% equity, plus purchase costs, because notary fees, transfer duties, charges and land-register costs are generally not financed by a standard mortgage.

Definition of the LTV ratio in a Swiss file

The direct translation of LTV ratio is “loan-to-value ratio”. In Swiss real-estate financing, it overlaps with loan-to-value, provided one specifies which value is used as the base. That is the trap: the LTV ratio is not always calculated on the seller’s asking price, but on the value accepted by the lending institution.

A property may be bought for CHF 850’000.–, but if the lender estimates its lending value at CHF 810’000.–, the loan-to-value is calculated on CHF 810’000.–. If you borrow CHF 648’000.–, your loan-to-value is not 76.2% of the price paid; it is 80% of the lending value. The banker is not telling you that the property is bad. He is telling you that, for his balance sheet and risk, he does not want to finance the part he considers as price paid above his collateral value.

How the LTV ratio calculation works in practice

The formula does not change, but the starting value changes everything

The formula is stable. What varies is the base used. In Switzerland, the lender generally reasons on the most prudent value among the purchase price, its own valuation and the lending value produced by internal methods. This approach avoids building a financing structure solely on market enthusiasm or on a one-off bidding premium.

Example: you buy a house for CHF 1’000’000.–. You have CHF 200’000.– in equity. You therefore request a CHF 800’000.– mortgage. On paper, the ratio is 80%. But if the institution uses CHF 950’000.– as the lending value, the CHF 800’000.– mortgage represents 84.2%. The file no longer sits in the same “drawer”. And in a bank, “drawers sometimes have locks”.

Purchase price, market value and lending value

The purchase price is the amount agreed between buyer and seller. The market value corresponds to a market estimate. The lending value is the value the lender accepts as the collateral base. These three figures can be identical. They can also diverge.

The practical rule is simple: the lower the value recognised by the lender compared with the purchase price, the more your actual personal contribution must increase. A loan-to-value of 80% of the lending value can therefore appear to correspond to financing below 80% of the price paid.

First rank, second rank and the two-thirds threshold

In Switzerland, a distinction is often made between the first mortgage and the second mortgage (first- and second-rank mortgages). The first generally covers up to about two thirds of the lending value. The second covers the part above this threshold, often up to about 80%. This distinction has a concrete consequence: the part above two thirds must in principle be amortised within a period defined by applicable rules and lender policy.

A financing at 65% or 66.67% means the mortgage is close to first rank. Financing at 80% generally involves a second mortgage and therefore an amortisation obligation. This obligation is not an accounting formality. It changes the annual charge considered in the affordability analysis.

What lenders look at behind the percentage

The lender does not only finance a property, it finances a risk

High financing means the lender assumes a larger share of financing compared with the collateral value. For the buyer, this allows less capital to be mobilised at the outset. For the institution, it increases exposure if the property has to be sold in an unfavourable environment. This logic explains why lenders do not all react in the same way to the same file.

This percentage is read with several other indicators: sustainable income, employment stability, wealth available after purchase, age, current expenses, possible personal loans, condition of the property, liquidity of the regional market, use of the home and coherence of the price. A 70% loan-to-value with weak affordability can be harder to defend than a 78% loan-to-value with solid income and a high residual savings buffer.

Impact of the LTV ratio on financing terms

The LTV ratio affects the reading of risk. The higher it is, the more closely the lender examines the details. In some cases, this can mean a less favourable margin, higher documentation requirements, a request for additional equity, faster amortisation or a straightforward refusal. The client sometimes sees only the interest rate offered. The lender sees a stack of ratios.

A low ratio can improve the negotiating position, but it does not automatically guarantee the best rate. Lenders also look at the overall relationship, volume, term, quality of the file, assets transferred, type of mortgage product and their own current commercial appetite. Competition between institutions therefore remains essential.

Pledging, pension assets and equity: the pieces of the puzzle

What the pledging ratio means

The pledging ratio is often used as a neighbouring concept. In practice, it refers to the share of financing granted in relation to recognised collateral. This may be the property itself, but also pledged assets: securities, pension assets, pillar 3a or other values accepted by the lender. The key remains the same: what value can the lender consider as usable collateral?

Pledging does not necessarily mean withdrawing the money. It can mean using it as collateral. For example, a pillar 3a asset or certain securities can be pledged to the bank. They remain in your name, but they serve as additional security. This mechanism can improve the financing structure, reduce the need for a withdrawal or strengthen a file whose loan-to-value is close to the limit.

Second pillar, pillar 3a and hard equity

Pension assets can be involved in financing owner-occupied housing in Switzerland, notably through an early withdrawal or a pledge. The second pillar is subject to specific rules: allowed forms of ownership, time between two withdrawals, limitations after age 50, spouse or registered partner consent in certain cases, repayment on sale and a restriction recorded in the land register when occupational pension assets have been used.

For the purchase of a main residence, the lender generally requires part of the equity not to come from the second pillar. This requirement aims to prevent a buyer from financing the entire personal share with the pension fund. The idea is simple: becoming an owner should not empty retirement savings like emptying a cellar before moving house.

Two numerical scenarios to measure the mortgage leverage effect

The two scenarios below use the same assumptions: purchase in Switzerland, purchase costs estimated at 3%, maintenance costs estimated at 1% per year, 60% mortgage over 10 years, annual interest at 2%, with no amortisation. The amounts are indicative. They do not replace a personalised simulation, because transfer duties, fees, tax rules and conditions vary depending on canton, profile and lender.

This deliberately sober presentation makes it possible to compare orders of magnitude without mixing three different topics: price, debt and remaining liquidity. In a real analysis, immediate works, reserves after purchase and the renewal strategy at maturity would also need to be included.

Scenario A: property at CHF 800’000.–

With a 60% loan-to-value, the buyer contributes CHF 320’000.– for the price itself. Around CHF 24’000.– in purchase costs are added if a 3% average is retained. The total liquidity need therefore approaches CHF 344’000.–, before any works, furnishing, moving costs or safety margin.

This scenario shows an often forgotten reality: a prudent ratio reduces debt, but it increases the initial contribution. Banking comfort is paid for with personal capital. In return, annual interest at 2% remains limited to CHF 9’600.–, and the absence of amortisation in this hypothesis reduces the direct annual charge.

Scenario B: property at CHF 650’000.–

In this second scenario, the contribution on the price reaches CHF 260’000.–. With purchase costs estimated at CHF 19’500.–, the required available funds approach CHF 279’500.–. Annual interest on the debt at 2% represents CHF 7’800.–, and maintenance costs estimated at 1% add CHF 6’500.– per year.

Our mortgage calculator can help you imagine the best purchase scenario with a mortgage loan.

How to improve your file before requesting a mortgage

Useful steps before sending the file to lenders

Before requesting an offer, it is preferable to prepare the file as a lender will read it. This means clarifying available equity, distinguishing cash, pillar 3a, second pillar, securities, gifts and possible family loans. Sustainable income, existing commitments and recurring charges must also be documented.

To improve this ratio or the way the lender perceives it, several levers exist:

• increase the equity contribution to reduce the requested mortgage amount;
• have the property assessed by several lenders when the lending value is uncertain;
• avoid using all available liquidity in the purchase;
• prepare pension documents early enough, because deadlines are not solved the day before signing;
• structure family loans with a clear agreement, or even a subordination if the lender requires it;
• compare offers on term, exit conditions, amortisation and ancillary requirements.

A professional mortgage broker can speed up this comparison. Their role is not to promise an impossible rate. Their role is to present a clean file, identify the most relevant lenders, defend the financial logic of the project and bring out the conditions that are truly comparable. For a buyer, this can avoid unnecessary refusals and lost weeks.

Frequently asked questions about loan-to-value

Would you like to know your real ratio?

A serious simulation does not start with a rate displayed on a page, but with your file: property price, likely lending value, equity, pension assets, income, charges and repayment strategy. Request a personalised analysis of your borrowing capacity and compare offers from several lenders before signing.

Legal and political status. The Swiss framework is based in particular on the Capital Adequacy Ordinance, the self-regulations of the Swiss Bankers Association recognised by FINMA as minimum prudential standards, and federal rules on promoting home ownership using occupational pension assets. Implementation of the final Basel III framework has been effective since 1 January 2025. To date, this guide is not based on a specific popular vote directly modifying household loan-to-value; it reflects the currently applicable regulatory and prudential framework.

Disclaimer. This article provides general information on loan-to-value, the LTV ratio and the pledging ratio in the Swiss mortgage context. It does not constitute a loan offer, nor personalised tax, legal or pension advice. Actual results depend on the canton, lender, property type, value retained, your financial situation and the documents available. Before making any decision, have your file analysed by a mortgage-credit specialist.

Sources used. Swiss Bankers Association, “Mortgage market – regulation & compliance”; FINMA, “Risks related to real estate and mortgages (2024)”; Federal Social Insurance Office, “Promotion of home ownership using occupational pension assets”.