- First mortgage (first-rank): Up to approximately 65–67% of the property’s appraised value (sometimes 66.67%).
This portion generally does not require amortization (repayment of principal). Borrowers can pay interest-only indefinitely, as long as they meet ongoing affordability tests. The lender holds a first-priority lien on the property. - Second mortgage (second-rank): Covers the remaining financed portion up to a maximum total LTV of 80% (sometimes 90% in exceptional cases).
This tranche must be amortized (repaid) within 15 years or by the borrower’s retirement age (typically 65 for men, 64 for women), whichever comes first. Amortization reduces the second mortgage to zero over time.
The mandatory 20% equity/down payment must come from the buyer’s own funds. At least half (10% of the purchase price) must be cash or liquid assets — not pension funds. The remaining 10% can come from:
- Savings
- Sale of existing property equity
- Second pillar (occupational pension, BVG/LPP) – up to the full vested benefit amount
- Third pillar (private pension, pillar 3a) – tax-advantaged withdrawals
This “pillar system” integration is unique to Switzerland and allows many residents to use retirement savings for homeownership while preserving tax benefits.Down Payment and Loan-to-Value (LTV) Rules
- Minimum equity: 20% of the purchase price or appraised value (whichever is lower).
- Maximum LTV: 80% (banks rarely exceed this for primary residences).
- For holiday homes/second residences: LTV often limited to 60–70%, with higher interest rates.
- Non-residents/foreigners: Stricter rules apply under Lex Koller (federal law restricting foreign property ownership). Non-EU/EFTA citizens without a C-permit generally cannot buy non-commercial residential property. EU/EFTA citizens with B- or C-permits can buy, but often face higher down payments (30–40%) and rates.
Affordability Test (Tragbarkeitsprüfung)Swiss banks apply a strict stress test to ensure borrowers can afford the loan even if rates rise:
- Interest rate used in calculation: imputed rate of 5% (even if actual rate is 1.5–2%).
- Total housing costs (interest + amortization + maintenance/imputed rental value) must not exceed 33–35% of gross household income.
- Maintenance costs: Typically calculated at 1% of property value per year.
- This test protects against future rate increases and ensures long-term sustainability.
Types of Mortgages Available in 2026
- Fixed-Rate Mortgages (Festhypothek)
Most popular type. Interest rate locked for 2–15 years (commonly 5 or 10 years).
Current rates (early February 2026):- 2 years: ~1.05–1.30%
- 5 years: ~1.20–1.60%
- 10 years: ~1.50–2.05%
- 15 years: ~1.70–2.20%
Provides payment certainty but less flexibility if rates fall.
- SARON Mortgages (variable rate)
Tied to the Swiss Average Rate Overnight (SARON), Switzerland’s risk-free reference rate.
Current SARON (February 2026): ~-0.05% to 0.00% (very low or negative).
Bank margin: 0.60–1.20% → effective rate ~0.64–1.20%.
Rate adjusts quarterly or monthly. Unlimited term, can switch to fixed-rate anytime.
Ideal when rates are expected to stay low or fall. - Money Market / LIBOR-like (phased out)
Largely replaced by SARON since 2021–2022 transition. - Building Loans (Bauhypothek)
For new construction or major renovations — disbursed in stages as work progresses.
Current Interest Rate Environment (February 2026)
- SNB key rate: 0.00% (unchanged since mid-2025 after cuts from positive levels).
- Inflation: Very low (~0.3–0.5%), supporting stable or slightly declining long-term rates.
- 10-year fixed-rate benchmark: 1.50–2.05% (depending on canton, credit score, LTV, bank).
- SARON + margin: 0.64–1.20% effective.
- Rates bottomed out in 2025 and are expected to rise modestly in 2026–2027 if global growth accelerates or SNB tightens.
Rates vary by:
- Creditworthiness
- LTV ratio
- Property type (primary vs. second home)
- Canton (Zurich/Geneva higher than rural areas)
- Bank relationship
Tax Implications and Deductions
- Mortgage interest is fully tax-deductible against taxable income.
- Maintenance costs and imputed rental value (Eigenmietwert) are deductible.
- Amortization payments on the second mortgage are not deductible (but reduce taxable wealth).
- Pillar 2/3a withdrawals for down payment may trigger tax penalties if not used correctly.
Special Considerations for Foreign BuyersNon-residents face major restrictions under Lex Koller:
- Generally prohibited from buying residential property (except holiday homes in tourist cantons with quotas).
- EU/EFTA citizens with residence permits can buy more freely.
- Mortgages for foreigners: Higher down payments (30–50%), higher rates (+0.1–1.5%), stricter affordability checks.
Risks and Tips for Borrowers
- Interest rate risk: Fixed-rate protects against rises; SARON benefits from low rates but vulnerable to hikes.
- Currency risk: Mortgages in CHF → risk if income is in foreign currency.
- Property value risk: Switzerland has low volatility, but over-leveraging in a downturn can cause issues.
- Early repayment penalties: High for fixed-rate if broken early.
ConclusionHome loans in Switzerland remain among the world’s most favorable — low rates, high stability, and tax advantages — but the system prioritizes prudence with strict affordability tests, mandatory amortization on second mortgages, and high equity requirements. In February 2026, buyers enjoy historically low rates (SARON ~0.6–1.2%, 10-year fixed ~1.5–2.0%), but should act soon if expecting modest increases in 2026–2027. Always compare offers from multiple banks or use independent brokers (MoneyPark, Comparis, HypoPlus), and consult a financial advisor or notary for personalized advice.Whether you’re a Swiss resident building equity or a qualified foreigner navigating Lex Koller, careful planning and stress-testing your budget are essential to making homeownership sustainable in one of the world’s most expensive housing markets.
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