Mortgage and down payment in Switzerland: what mistakes should be avoided?
Applying for a mortgage in Switzerland requires serious preparation. Learn the down payment rules, affordability limits, and the most common mistakes — with concrete figures.
What down payment do Swiss banks require?
The basic principle of Swiss mortgage regulation (Hypothek) is that the bank finances at most 80% of the property’s market value. This is the so-called first mortgage (erste Hypothek / premier rang hypothécaire), which covers up to 65% of the property value, and a second mortgage (zweite Hypothek), which covers the remaining portion — if the bank grants it as well.
The down payment is therefore at least 20%, but in practice the picture is more complex.
What counts as “real” down payment — and what does not?
Swiss banking regulation (based on the self-regulatory guidelines of the Swiss Bankers Association / Schweizerische Bankiervereinigung) requires that at least 10% of the down payment may not come from the mandatory second pillar (BVG savings). This means that:
Source of down payment | Accepted? | Note |
|---|---|---|
Savings in a bank account | Yes | Simplest source |
Securities portfolio | Yes | Typically valued at 80% |
Gift / inheritance | Yes | Must be documented |
Third pillar (Säule 3a) | Yes | With restrictions |
Second pillar (BVG) — mandatory portion | Up to 10% | Cannot replace the full down payment |
Second pillar — voluntary extra contributions | Yes, in full | Cantonal differences may apply |
Loan from a private individual | Usually not | Counts as debt |
Important from a Hungarian perspective: if, upon arriving in Switzerland, you are already thinking about buying property, the amount accumulated in the second pillar will still be modest in the first few years. The actual equity therefore typically has to come from savings, the sale of property in Hungary or an inheritance.
What mortgage types exist in Switzerland?
Fixed-rate mortgage (Festhypothek / hypothèque à taux fixe)
During the term — typically 2–15 years — the interest rate does not change. It provides predictable instalments, but early termination usually involves a significant penalty interest charge (Vorfälligkeitsentschädigung). In 2024–2025, the 10-year fixed rate in Switzerland was roughly 1.5–2.5% but this varies by bank and market conditions.
Variable interest rate (variable Hypothek / hypothèque variable)
There is no fixed term; the interest rate follows market conditions. It is flexible, but unpredictable. In Switzerland, this type has declined over the past decade because fixed-rate structures have become more competitive.
SARON-based variable interest rate (SARON-Hypothek)
Since the phase-out of LIBOR in 2021, the Swiss short-term reference rate has been SARON (Swiss Average Rate Overnight). The interest on SARON-based loans changes every 3 months and includes the bank margin (Marge) added to SARON. It is advantageous in a low-interest environment, but risky when rates are rising.
When is it worth choosing which one?
This decision depends on your individual risk tolerance, how long you plan to stay in the property, and your expectations for the interest-rate path. General guideline:
Long-term plans, need for predictability → fixed interest rate, longer term
Flexibility, possible early sale → shorter term or SARON-based
Mixed strategy → place part of the amount in a fixed-rate loan and the other part in a SARON-based loan (tranche strategy)
What does affordability (Tragbarkeit) mean — and what is the 5% rule?
Swiss banks do not only check whether you have sufficient equity. They also assess whether the loan is sustainable in the long term — this is what the Swiss system calls Tragbarkeit.
The logic of the calculation
The bank adds up the following items, and the resulting annual burden must not exceed 33% of gross annual income (35% at some banks):
Imputed interest: the bank applies not the current market rate, but a 5% imputed interest rate — regardless of whether the actual rate is currently 1.8% or 2.3%.
Amortization: the second mortgage (the portion between 65% and 80% of the property value) must be repaid within 15 years, which means roughly 1% amortization per year.
Maintenance costs: roughly 1% of the property’s value per year.
Example: a property worth CHF 1,000,000 with a loan of CHF 800,000:
Imputed interest (5%): CHF 40,000/year
Amortization (1%): CHF 8,000/year (for the second mortgage)
Maintenance (1%): CHF 10,000/year
Total: CHF 58,000/year
For these costs, the bank expects the gross annual income to be at least CHF 175,000 (58,000 / 0.33 ≈ CHF 175,758).
Why 5%? — The logic of the risk buffer
The 5% imputed interest rate is a conservative stress test. In Switzerland, the property market crash and rising interest rates in the early 1990s together ruined the finances of many households. The current rules are designed to prevent this risk.
What is LTV and what is the 65% rule?
The LTV (Loan-to-Value), that is, the ratio of the loan to the property value, is capped at 80% in Switzerland. The first mortgage (erste Hypothek) covers up to 65% of the property value — this is the portion the bank generally does not expect to be amortized. The portion between 65% and 80% is the second mortgage, which must be repaid within 15 years.
What mistakes do buyers most often make?
Mistake 1: Underestimating equity — ignoring incidental costs
In addition to the purchase price of the property, there are several one-time costs that must be covered from equity:
Notary fee and land register entry (Grundbucheintrag): varies by canton, typically 0.1–0.5%
Property transfer tax (Handänderungssteuer): does not exist in every canton; where it does, it is typically 1–3% (e.g. Fribourg, Bern, Jura); there is no such tax in Zürich and Zug
Bank fees and valuation: typically CHF 500–2,000 between
Attorney / broker fees: variable
These can amount to 3–5% of the purchase price. If this is not budgeted for, the equity contribution “evaporates,” and the bank rejects the application.
Mistake 2: Ignoring interest rate risk
Anyone who took out a loan in 2021–2022 with a 10-year fixed rate is still paying the rate from that time — historically low — in 2025. However, anyone who chose a short-term or SARON-based loan felt the full impact of the rate-hiking cycle in 2022–2023.
2025–2026 scenario: The Swiss National Bank (SNB / Schweizerische Nationalbank) lowered the key interest rate in several steps during 2024. Market expectations for 2025–2026 point to a stable or slightly declining interest-rate path, but this is not guaranteed. Anyone taking out a loan now should:
Model the monthly instalment with at least a 1–1.5 percentage point interest-rate increase as well
Not concentrate the expiry of the fixed term in a single year (tranche strategy)
Apply for less than the maximum amount available, and leave a buffer
Mistake 3: The bank’s valuation differs from the purchase price
The bank does not use the purchase price, but rather the market value of the property as determined by the bank (Belehnungswert). If the bank values the property at CHF 900 000, but you pay CHF 1 000 000, the bank will finance only CHF 720 000 (CHF 900 000 × 80%) — you must cover the difference yourself.
This can happen especially in hot property markets (Zürich, Geneva, Zug), where purchase prices exceed bank valuations.
Mistake 4: Situations without insurance
In Switzerland, some property-related insurance policies are mandatory, while others are strongly recommended:
Building insurance (Gebäudeversicherung): mandatory in most cantons and operated through a state monopoly (e.g. GVZ in Zürich, GVB in Bern)
Life insurance / disability insurance: if one partner’s income disappears, the affordability test may fail — something many people do not think through in advance
Mistake 5: The long-term consequences of withdrawing from the second pillar
Using BVG savings for a property purchase (Vorbezug) reduces future retirement benefits. If the property is later sold, the withdrawn amount must be repaid to the pension fund — or tax must be paid on it. This is especially relevant for Hungarians who may return home after a few years: the repayment obligation does not automatically end when the property is sold.
How do Swiss banks assess a mortgage application?
Swiss banks examine the following factors:
Criterion | What does the bank look at? |
|---|---|
Income | Gross annual income, stability (open-ended contract is an advantage) |
Residence permit | C permit (Niederlassungsbewilligung) is preferable, but a B permit (Ausländerausweis B) is also possible, although some banks are more cautious |
Source of equity | Documented, legally verifiable source |
Credit history | In Switzerland, the ZEK (Zentralstelle für Kreditinformation) record; a negative entry is disqualifying |
Property type | Primary residence (Erstwohnung) is assessed more favorably than a holiday home or investment property |
Cantonal differences | In some cantons, tax burdens and property prices differ, which affects the affordability calculation |
From a Hungarian perspective:A mortgage can also be obtained with a B permit, but some banks require a higher down payment or income. Obtaining a C permit (usually after 5 years of lawful residence, as an EU citizen) improves the assessment. For third-country nationals (non-EU/EFTA), the Lex Koller law may restrict property purchases — as a Hungarian citizen, this does not apply to you, since Hungary is an EU member state and, under the Agreement on the Free Movement of Persons (FZA, 1999), you are treated as an EU citizen.
What should you watch for in rising-interest-rate scenarios?
The global interest-rate hiking cycle of 2022–2023 also reached Switzerland: the SNB policy rate rose from the previous negative range to 1.75%, then gradually declined in 2024. According to market analysts, expectations for 2025–2026 point to a policy-rate range of around 0.5–1%, but this may change.
What is worth modeling in advance:
If the SARON-based interest rate rose by 1 percentage point, by how much would the monthly installment increase?
When the fixed term expires and the new interest rate is 2 percentage points higher, would the loan remain affordable?
Is there sufficient liquid reserve (generally recommended: 3–6 months of installments) for unexpected expenses?
What role does an independent advisor play?
In Switzerland, mortgage brokers (Hypothekarvermittler) and independent financial advisors (unabhängige Finanzberater) can help compare offers from multiple banks. Bank advisors recommend their own products — an independent expert represents your interests.
It is especially advisable to involve an independent advisor if:
The property value exceeds CHF 1 million
You are applying as a self-employed person (Selbstständigerwerbender), where income verification is more complex
You have a mixed income structure (e.g. bonus, part-time work, multiple sources)
You have a B permit and are uncertain about the bank’s assessment
Sources
Swiss Federal Portal: https://www.ch.ch/en/
Swiss Bankers Association (Schweizerische Bankiervereinigung / Swiss Bankers Association): www.swissbanking.org
Swiss National Bank (SNB / Schweizerische Nationalbank): www.snb.ch
Swiss Federal Social Insurance Office — BVG regulations (BSVI / OFAS): www.bsv.admin.ch
Swiss Federal Statistical Office — real estate market data (BFS / OFS): www.bfs.admin.ch
ZEK (Central Credit Information Office): www.zek.ch
Related Articles
In Brief
In Switzerland, a mortgage requires at least 20% equity, but at least 10% of that may not come from the mandatory second pillar. Banks assess not only the equity contribution but also the affordability of the loan: they calculate with a 5% imputed interest rate, amortization, and maintenance costs, so income typically needs to cover at least three times the charges.
Key Takeaways
- You also need to account for ancillary costs on top of the purchase price, as these can increase the required equity by 3–5%.
- You must check that at least 10% of the equity does not come from the mandatory BVG portion.
- When choosing a loan, the term and interest-rate risk should be aligned with the intended period of residence.
- The bank’s valuation should be used as the basis, not the purchase price, because financing is calculated from that amount.
- Affordability should be modeled in advance using a 5% imputed interest rate, not the current market rate.
- It is worth considering insurance and pension implications as well, especially when using the second pillar.
Frequently Asked Questions
How much equity is required for a Swiss mortgage?
Banks finance up to 80% of the property’s market value, so at least 20% equity is required. In practice, however, ancillary costs may mean that more own funds are needed than that.
What counts as acceptable equity in Switzerland?
Acceptable sources may include savings in a bank account, a securities portfolio, gifts, inheritances, and the third pillar, subject to certain limits. No more than 10% may come from the mandatory second pillar, and it cannot replace the full equity contribution.
What is Tragbarkeit, and why is it important?
Tragbarkeit means the affordability of the loan. The bank checks whether the imputed interest, amortization, and maintenance costs together do not exceed roughly 33% of gross annual income.
Why does the bank calculate with 5% interest if market rates are lower?
This is a stress test that addresses the risk of future interest-rate increases. The purpose of the rule is to ensure that the loan remains affordable even if interest rates rise significantly.
What is the most common mistake buyers make regarding equity?
A common mistake is to budget only for the purchase price and forget notary fees, land registry entry, possible property transfer tax, and bank and valuation costs. Together, these can amount to 3–5% of the purchase price.
What happens if the second pillar is used for a property purchase?
Using BVG savings reduces future retirement benefits. If the property is later sold, the withdrawn amount must be repaid to the pension fund, or a tax obligation may arise.
Is a fixed-rate or SARON-based mortgage better in Switzerland?
It depends on risk tolerance, the planned holding period, and the interest-rate outlook. For a longer-term, predictable solution, a fixed rate may be suitable; for flexibility or a mixed strategy, a SARON-based mortgage or a tranche solution may be appropriate.
This guide is available after registration
During the launch period, the full knowledge base is available with free registration.
CHF 0 during launch
- All guides and checklists
- Downloadable PDF templates
- Sample documents
- Early access to new content
Preview - the guide continues after login
Related guides
- How does a Swiss mortgage work from a Hungarian perspective?
- 🔒 How can you obtain a mortgage in Switzerland?