HYPOHAUS is your independent partner when it comes to mortgages in Switzerland.
In order to obtain a mortgage in Switzerland, two minimum requirements must be met, as defined by the lenders: the loan-to-value ratio and the affordability must be within certain limits. The loan-to-value-ratio, i.e. the ratio between the mortgage and the market value of the property, must not exceed 80 percent. This means, in reverse, that at least 20 percent of the market value must be raised with own funds of the borrower. Own funds are not just cash, inherited assets or private loans. Pension funds from the 2nd and 3rd pillars may also be withdrawn in advance or pledged in order to increase the equity. The second requirement is the affordability of a mortgage. Put simply, this means that your gross income must be able to cover all expenses for interest and amortization, as well as the maintenance of the property. The mortgage payments should not exceed a third of your gross income.
Basically, there are three mortgage models that play a role in financing: fixed-rate mortgages, variable-rate mortgages and Saron mortgages. The latter two models, in particular, are based on fluctuating interest rates. All three models have specific advantages and disadvantages. When analyzing your mortgage request your HYPOHAUS mortgage expert will show you the most suitable product for you.
If you are a citizen of an EU or EFTA country or a third-country national and already rented a place to live in Switzerland, then you should generally already be in possession of a valid residence permit (B permit). In this case, you are permitted to acquire property or an existing building for your own use. If you have a C permit for Switzerland, you are allowed to buy more than one plot of land for residential use or real estate of any kind. For people who are not yet resident in Switzerland, a permit is required before purchasing real estate.
In order to guarantee affordability, your total living expenses (mortgage interest, repayments, maintenance, and ancillary costs) should not exceed one third of your gross income. That’s why lenders do their calculations of theoretical mortgage interest using a long-term average rate of 5%. In addition, amortization as well as maintenance and ancillary costs, such as utility charges, insurance, and minor repairs, have to be taken into account when determining affordability. They are generally calculated at an annual rate of 1% of market value.
In Switzerland, a distinction is made between direct and indirect repayment. With direct repayment, you pay the bank back for the mortgage in regular installments. With indirect repayment, the installments are paid into a tied pension account or safekeeping account or into a life insurance policy. These amounts will only be used to repay the mortgage debt when the tied pension account is closed. Over the time period of 15 years the lender requires you to pay back the mortgage up to a loan-to-value ratio of 65%. As long as the lender’s affordability calculation allows, you are not obliged to pay back more than a loan-to-value ratio of 65%.
In general, you have three options:
- The existing mortgage can be transferred to the new buyer.
- The existing mortgage can be transferred to a new apartment or house you purchase
- Early termination of the mortgage contract
Depending on the type of mortgage you chose, you have more or less flexibility when it comes to an early termination of the contract. In general, early termination of a mortgage is not ideal, even if you are in the more flexible Saron mortgage. This is due to the fact that most lenders have 2-5 years contracts for Saron mortgages. Identical to fixed-rate mortgages, those contracts come with a penalty payment upon early termination. Such a penalty can become quite a financial burden and therefore you should evaluate such a decision wisely.
You basically have two options:
- You transfer the mortgage to the new buyer for the remainder of the tenure
- You opt for an early termination of the mortgage. Withdrawing from the mortgage contract ahead of the agreed term normally involves paying a penalty fee for breaking the contract. The same rule applies – to a lesser extent – to Saron mortgages.
No. Our services are limited to Swiss properties only.