Mortgage FAQ

Mortgages Frequently Asked Questions (F.A.Q.)

I am not a Swiss Citizen; can I buy a property in Switzerland with a work or residence permit?

Switzerland has strict regulations about the purchase of properties by foreigners. Generally speaking you can purchase a residence with a Swiss B permit, however the rules differ from canton to canton.

You can buy any property if:

* You are an EU or EFTA national with a Swiss residence permit who resides in Switzerland.

* Or You hold a Swiss C Permit.

o In both cases, you will have the same rights as a Swiss citizen to purchase property, so you can buy business premises, investment properties or a holiday home, in addition to a primary residence.

* If you hold a Swiss B Permit, you may purchase a property, but only to live in.

o Owning a property does not insure you will receive a residence or work permit in the future. You may not be able to rent this property should you leave Switzerland the rules can vary from canton to canton.

How much can you borrow in Switzerland?

Lenders in Switzerland will typically require that your monthly income is at least three times the amount required to repay the loan based on a interest rate test. Generally they will base the test on an interest rate of 5% will often include maintenance or insurance charges in this calculation, so the income requirement may be higher than elsewhere for a loan of the same value. Contact us to find out exactly how much you may qualify for.

Can I finance 100% of the purchase price

100 percent mortgages are rare or non-existent in Switzerland. In almost all cases it is required that the purchaser put down a minimum of 20 percent of the purchase price as a deposit.

Minimum deposit

Guidelines call for a 20 percent minimum deposit. The Swiss government has been tightening regulations since in response to low interest rates, raising concerns about unsustainable lending and rising property prices which may develop into a bubble. At least 10 percent of the property purchase price must be put down by the buyer in cash, while the other 10 percent (or more) can be arranged using your pension as collateral. Cash down payment can be from cash savings, investments or 3rd pillar savings plans.

Using your pension as your deposit

The two methods of using a pension to fund a deposit on a property are to withdraw the funds from the pension or to pledge the fund.

* Withdrawing the funds and applying them to your mortgage will reduce your pension fund and your mortgage, thus reducing interest paid.

* Pledging will allow you to retain the benefits and size of your pension fund but will not reduce the interest required.

* In both cases, your fund will be at risk if you do not keep up repayments on your mortgage and it is strongly recommended that you discuss your particular situation with a financial advisor.

The second Pillar (BVG) can be used to fund the deposit on a property. However:

* The property must be a primary residence;

* It must be owned by you alone or you and your spouse or registered partner

* If you default on your mortgage you will also lose your pension

* You must already have paid into the pension fund and accrued a sum to pledge

* This option is therefore unlikely to be available to those who have recently arrived in the country.

Why do Swiss banks require 2 mortgages for one property?

Swiss mortgages are divided into two mortgages. The first accounts for 2/3 of the value of the property, the second for the remaining amount required up to the purchase price minus the deposit.

The first mortgage will typically have an indefinite repayment period

The second mortgage will typically have a fixed repayment period, usually up to 15 years or by the owners retirement age of 65 which ever is less.

What types of loans are available?

With the exception of 100 percent mortgages, most common loan types are available in Switzerland. The specific details of products will vary from lender to lender, but you can expect to find:

Fixed rate mortgages;

Variable rate mortgages;

Capped rate mortgages;

Bridging loans.

How to arrange a mortgage.

Most people assume that In Switzerland, loans are typically arranged directly with the lender, usually a major bank, rather than through a mortgage broker or agent. You’ll usually have to contact the banks yourself and request information on rates and the paperwork may need to be done in person. Because we are independent advisors, when you use our mortgage service we will shop for rates with over 40 different lenders, guide you through all of the lending requirements and insure you fully understand the process. As an expat there are many different rules and requirements that must be met in order to obtain property in Switzerland and they are varied from canton to canton. We are experts in helping expats with all of their lending needs and we will take you by the hand through the entire process.

Contact us to find out how we can help you purchase a new home.