UNDERSTANDING THE SWISS MORTGAGE SYSTEM

If you are relocating to Switzerland permanently, or have been living as a Swiss resident for a couple of years, you might already be thinking about owning a home in the country. One of the easiest ways to own a home in the country, just like in any other country in the world is to take out a mortgage to help you realise your dream of owning your own home.

In order to take full advantage of the mortgage system in Switzerland, you need to understand how it works. In nearly all respects, the mortgage system in Switzerland is the same as in other developed nations. However, there are a few quirks about this particular system that you need to have a handle on before proceeding.

How the Swiss Mortgage Works

Mortgage rates

The mortgage interests in the country are surprisingly low especially for a developed country. Traditionally, the mortgage rates in Switzerland averaged about 5%, but they dropped drastically with the lowering of the Euribor rate.

Nowadays, usually the rates range from 1%-2%, but these rates vary from bank to bank. In addition, your financial history and background, as well as your debt repayment history will also determine the mortgage rate that the bank will set for you.

With such a wide range of rates being offered by the banks, it is important to shop around for the cheapest rates.

Payment of deposits

In order for you to be able to get a mortgage from a Swiss bank, you have to pay a deposit. Usually, the banks will require you to put up a deposit of about 20% of the current market value of the house you wish to purchase. Half of this needs to be in cash and upgrade, whilst the other half, you can pay using some of the money in your pension fund.

The mortgage lending laws in Switzerland might be much stricter than most parts of the world, especially if you are planning to pay a smaller deposit than is the norm. However, the repayments periods for these types of loans are incredible long with some mortgage agreements going up to 50-100 years.

Pension Fund rules

As a foreigner permanently residing in Switzerland, you are entitled to use a portion of your pension fund to help you secure the mortgage from the bank. However, this opportunity comes with very strict rules and you need to adhere to. The rules include:

  • You alone can own the house, although you are allowed to share ownership with a spouse or your registered partner
  • If you default on the mortgage, then you will lose your entire pension
  • The house you intend to purchase with the mortgage needs to be your primary residence
  • There needs to be a sufficient amount of money in your pension fund for you to pledge some of it in a bid to secure a mortgage.

It is important to note that it might prove extremely difficult for you to use the money in your pension fund to help you get the mortgage if you have only stayed in the country for a short time. This is because you might not have accumulated enough money that can be considered for a 10% mortgage deposit.

  • You cannot use funds from a non Swiss pension fund in order to finance part of your mortgage deposit

Cosmos Values Real Estate is the lead expert in the country when it comes to helping foreigners that have relocated to Switzerland in finding and securing a mortgage. The company uses its years of experience in the real estate industry as well as modern, innovative methods to ensure that you get the mortgage that is right for you.