How much equity is required for a Swiss mortgage?

In general, at least 20% of the property purchase price must be covered by your own funds. Of this, at least 10% must come from “hard” savings, such as cash, securities, inheritance, or a gift. The remaining portion may, under certain conditions, also be covered from the second pillar.

Can savings or property in Hungary be used as part of the equity?

In principle, yes, but the Swiss bank will require detailed documentation on the origin of the funds. If assets in Hungary are involved, you should expect translations, supporting documents, and in some cases notarised certification as well. For the bank, proof of origin is a key issue.

What is the difference between the first and second mortgage?

The first mortgage covers up to 66.67% of the property’s value and is the cheaper, lower-risk portion. The second mortgage applies to the range between 66.67% and 80%, carries a higher interest rate, and must be amortised, typically within 15 years or at the latest by retirement age.

Why is a higher income needed for a Swiss mortgage than the monthly repayment would suggest?

Because the bank does not calculate with the actual market interest rate, but with a theoretical 5% rate. It then adds amortisation and maintenance costs, and checks whether this annual burden exceeds 33% of gross income, or 35% at some banks.

Which interest model is the safest: fixed, variable, or SARON?

A fixed rate is more predictable because it remains unchanged until the end of the term, but early termination can be expensive. A SARON-based structure is more flexible, but it carries interest-rate risk, while a variable rate follows market movements. The choice depends on the interest-rate environment and your risk tolerance.

What tax advantage does a Swiss mortgage have?

Mortgage interest is deductible from income tax, which is one of the main reasons many people do not rush to repay the loan in full. At the same time, for owner-occupied property, the imputed rental value (Eigenmietwert) is also taxed, which offsets the benefit of the interest deduction.

What documents does the bank request for a mortgage application?

Typically, the bank asks for the last 2–3 years of tax returns and tax authority assessments, current salary certificates, proof of the origin of your equity, and the property purchase documents. The bank may also prepare its own valuation or accept an accredited appraisal.

How does a Swiss mortgage work from a Hungarian perspective?

What are the basics of a Swiss mortgage — types and conditions?

Swiss banks and insurers distinguish between two main mortgage classes:

First mortgage (erste Hypothek): covers up to 66.67% of the property’s value. This is the cheaper, lower-risk portion.
Second mortgage (zweite Hypothek): the range between 66.67% and 80%. It comes with a higher interest rate and — unlike the first mortgage — must be amortized, usually within 15 years, but no later than retirement age.

The range of institutions offering mortgages is broad: commercial banks (UBS, UBS as the successor to Credit Suisse, Raiffeisen, Kantonalbanken), insurers (Swiss Life, Zurich), pension funds, and online brokers (e.g. Moneypark, Hypomat).

Important principle: In Switzerland, a mortgage is typically not fully amortized over the term. Most borrowers never repay the principal of the first mortgage in full — they pay the interest and benefit from the tax advantage. This is a deliberate system design, not a failure to repay.

How much equity is needed, and where can it come from?

What is the required minimum equity?

Under Swiss regulations (FINMA guidelines and the self-regulatory standards of the Swiss Bankers Association), at least 20% of the purchase price of the property must be covered by own funds.

Of this:

At least 10% must come exclusively from “hard” savings (cash, securities, inheritance, gift) — so not from a pension fund.
The remaining up to 10% may be provided from the second pillar (berufliche Vorsorge / BVG) through early withdrawal (Vorbezug) or pledging (Verpfändung).

What sources can be used to finance the equity?

Source	Can be used?	Limitations
Savings in a bank account	Yes	The origin must be documented
Securities portfolio	Yes	At market value, with a volatility discount
Gift / inheritance	Yes	A written declaration is required
Second pillar (BVG) early withdrawal	Partially	Max. 10% from own funds; tax implications apply
Pledging the second pillar	Partially	Does not reduce the pension capital, but it does carry risk
Third pillar (Säule 3a)	Yes	Can be used for housing purposes, with tax implications
Loan from a private individual	No	Banks do not accept this as own funds

From a Hungarian perspective: if you have recently arrived in Switzerland, the capital accumulated in the second pillar may still be modest in the first few years. The “hard” 10% minimum can typically only be met after a longer period of employment in Switzerland and deliberate saving from Swiss sources. Property or savings in Hungary can in principle be used, but the Swiss bank will require detailed documentation and proof of the origin of the funds.

What is the loan-to-value ratio (LTV), and how does it affect loan terms?

The loan-to-value ratio (loan-to-value, LTV; in Swiss terminology: Belehnung) shows what percentage of the property’s value is covered by the loan amount.

Swiss maximums:

Residential property (owner-occupied): maximum 80% LTV
Investment property (Renditeliegenschaft): maximum 75% LTV (lower at many banks)
Holiday home / weekend house: maximum 70% LTV (and Lex Koller restrictions apply — see below)

The lower the LTV, the better the interest rate the bank will offer. An LTV below 66.67% is particularly favorable, because only the first mortgage tranche applies in that case.

Lex Koller: EU/EEA citizens (including Hungarians) may buy property in Switzerland for their own residential use relatively freely. However, the purchase of investment property or a holiday home may fall under the Lex Koller (Bundesgesetz über den Erwerb von Grundstücken durch Personen im Ausland, BewG) and may require cantonal authorization. This rule also applies to EU citizens in certain categories.

Which interest-rate models can you choose from?

Fixed-rate mortgage (Festhypothek)

The interest rate remains unchanged until the end of the term. Term: typically 2–15 years (up to 25 years at some banks). Predictable monthly payments, but early termination is expensive (Vorfälligkeitsentschädigung — the interest differential for the remaining term).

Variable-rate mortgage (variable Hypothek / hypothèque variable)

There is no fixed term; the interest rate follows market conditions. Flexible, but unpredictable. In 2022–2023, this model became significantly more expensive due to the interest-rate hike cycle. Today, few people choose it as their first option.

SARON-based variable interest rate (SARON mortgage)

Since the phase-out of LIBOR in 2021, the benchmark for Swiss variable-rate loans has been SARON (Swiss Average Rate Overnight). The interest rate is adjusted quarterly or monthly. Lower initial interest, but it carries interest-rate risk.

Which one is worth choosing?

As a general rule: if the current interest-rate environment is historically low, a longer fixed term provides protection. If rates are high and expected to fall, a shorter term or the SARON model is more flexible. The decision depends on individual risk tolerance and financial planning horizon.

What does the sustainability criterion (Tragfähigkeit) mean?

Tragfähigkeit (sustainability, affordability assessment) is one of the most important — and for many, surprising — elements of the Swiss mortgage system.

The essence of the rule: the bank does not calculate with the current market rate, but with a theoretical 5% interest rate (imputed interest rate / kalkulatorischer Zinssatz). To this it adds annual amortization (typically 1% of the loan amount) and maintenance costs (about 1% of the property value per year).

The criterion: the annual burden calculated this way may not exceed 33% of gross annual household income (35% at some banks).

What does this look like in numbers?

Example: property worth 800 000 CHF, loan of 640 000 CHF (80% LTV).

Item	Annual amount
Imputed interest (5%)	32 000 CHF
Amortization (1% of the loan)	6 400 CHF
Maintenance costs (1% of the property value)	8 000 CHF
Total	46 400 CHF

Based on the 33% rule, the minimum required gross annual income is: 46 400 / 0,33 ≈ 140 600 CHF.

This means the household needs roughly 140 600 CHF in gross income per year — even if the current interest rate is around 2% and the actual monthly instalment is much lower.

From a Hungarian perspective: this is one of the most common obstacles. A Hungarian employee who has recently arrived in Switzerland and is still in a lower-paid position may not reach this threshold — especially in a one- or two-child household where one partner works part-time.

What energy-efficiency and sustainability requirements apply to the property?

In Switzerland, the energy rating of a property (Gebäudeenergieausweis der Kantone, GEAK) is playing an increasingly important role in lending decisions.

Some cantons and banks offer more favourable interest rates for a “green” mortgage (Grüne Hypothek / hypothèque verte) if the property meets certain energy standards (e.g. Minergie certification).
For properties that are energetically outdated (old heating system, poor insulation), the bank may ask to see a renovation plan and may also factor the expected renovation costs into its creditworthiness assessment.
From 2025, several cantons are tightening the rules on replacing oil heating systems — this may affect the value and mortgageability of such properties.

What are the tax and insurance implications of a mortgage?

Tax

Interest is deductible: mortgage interest is deductible from income tax in Switzerland (at both federal and cantonal level). This is one of the main reasons why Swiss homeowners do not rush to repay their loans.
Eigenmietwert (imputed rental value tax): In Switzerland, even owner-occupied property is taxed — a notional rental value (Eigenmietwert) is treated as income. This offsets the tax benefit of interest deductibility. The system is politically controversial, and initiatives to abolish it regularly come up, but as of early 2025 it is still in force.
Property transfer tax (Handänderungssteuer): a cantonal matter, with rates varying from canton to canton (generally between 0 and 3.3%).

Insurance

Building insurance (Gebäudeversicherung): mandatory in most cantons and administered by a state monopoly (e.g. GVB in Bern, GVZ in Zürich). The lending bank will usually require it.
Life insurance / debt insurance: not mandatory, but the bank may recommend it. It is worth comparing options with an independent adviser, as bank packages are not always the most favourable.

What steps does the mortgage application process involve?

1. Initial financial assessment

Before you start looking for a property, it is advisable to request an indicative mortgage offer (Richtwertangebot / offre indicative) from one or more banks. This shows how much you may be eligible to borrow and on what terms.

2. Choosing a bank and comparing offers

It is not worth accepting the first offer. Cantonal banks (Kantonalbank) are often competitive, but online brokers (Moneypark, Hypomat, key4 from UBS) also make it possible to compare offers meaningfully. The difference can be as much as 0.2–0.5 percentage points under the same conditions — which is a significant amount over a 20–30 year term.

3. Preparing the documentation

The bank will typically ask for:

Your last 2–3 years of tax returns and tax assessments (Steuerveranlagung)
Your current salary certificate (Lohnausweis)
Proof of the origin of your savings and equity contribution
The preliminary purchase agreement for the property or the seller’s offer
The property valuation (the bank will either send its own appraiser or accept an accredited valuation)

From a Hungarian perspective: if you are supplementing your equity with foreign income or assets held in Hungary, the bank may request a translation and possibly notarised certification. This takes time — it is worth planning for it in advance.

4. Credit decision and signing the contract

The bank’s decision is usually made within 1–3 weeks if the documentation is complete. The contract is signed before a notary (cantonal differences may apply).

5. Disbursement and land register

The loan is disbursed at the same time as the entry in the land register (Grundbuch). The fee for registering the mortgage is also determined at cantonal level.

Sources

Swiss federal information portal: https://www.ch.ch/en/
Swiss Bankers Association (Schweizerische Bankiervereinigung / Swiss Bankers Association): www.swissbanking.org
FINMA — Swiss Financial Market Supervisory Authority: www.finma.ch
Swiss National Bank (SNB) — key interest rate and monetary policy: www.snb.ch
Federal Statistical Office (BFS/OFS) — real estate market data: www.bfs.admin.ch
Lex Koller (BewG) — federal legislation: www.fedlex.admin.ch
GEAK (cantonal building energy certificate): www.geak.ch