Financing

When purchasing a primary residence, it is common practice to finance a minimum of 20% of the purchase price, including the notary's fees (typically around 5%), from your own assets. Funds from other sources can cover the remaining balance. For instance, consider that you've identified your ideal property, valued at €1,000,000. In this case, your funds should amount to at least CHF 200,000 and an additional CHF 50,000 to cover notary fees, totalling CHF 250,000. These funds can be sourced from your savings and occupational and private pension assets (2nd and 3rd pillars), with a minimum of 10% coming from your personal savings. Additionally, a donation or an interest-free, repayment-free family loan may be considered part of the required equity.

A mortgage is a viable financing option to complement your available funds when purchasing a property. Funding partners can offer loans of up to 80% of the property's value through a combination of two mortgages. The first mortgage, often called the primary mortgage, covers up to 67% of the property's value. In contrast, the remaining balance is financed through a second secondary mortgage. Generally, the secondary mortgage must be repaid, or amortised, within a maximum of fifteen years, whereas the primary mortgage does not have a mandatory repayment schedule. Both loans incur mortgage interest, though the interest rates may differ in some cases.

Switzerland offers various standard mortgage models, including:

• Fixed-rate mortgages: Typically with terms ranging from 2 to 10 years, and sometimes longer, featuring a fixed interest rate.

• Variable-rate mortgages: These mortgages come with variable terms, and the interest rate adjusts based on the capital market conditions.

• Money market-indexed mortgages: Generally, these have a fixed term of three to five years (known as the framework term). The interest rate for such mortgages is usually tied to SARON (Swiss Average Rate Overnight), a rate calculated based on actual market transactions, plus a margin set by your financial partner.

Feel free to inquire about the different mortgage models available to find the one that best suits your needs.

There are two types of mortgage repayment options:

1. Direct Repayment: In this method, your periodic contractual repayments directly reduce your mortgage debt, resulting in lower interest charges.

2. Indirect Repayment: This option involves using a 3rd pillar bank account or a 3a or 3b insurance policy as additional security (collateral in favour of your financial partner). With this approach, the mortgage loan amount remains unchanged, keeping your interest burden constant. The capitalised sum is only used to repay your debt at retirement or a predetermined time.

1. Assess Your Financial Situation: Analyze your income, expenses, and savings. Consider any existing financial commitments, such as outstanding loans or healthcare expenses. Calculate your ability to make monthly mortgage payments while maintaining a comfortable standard of living.

2. Use a Mortgage Calculator: Utilize a mortgage calculator to get an initial estimate of your capacity to manage the financial responsibilities of your dream property.

3. Explore Suitable Financing Options: Research loan options tailored to your specific circumstances, including different interest rate choices (short or long-term) and repayment options based on age. Remember to investigate potential tax benefits, such as indirect depreciation.

4. Consult a Property Finance Expert : Seek advice from a property finance professional who can comprehensively assess your situation and guide you toward the most suitable financing options. Our financing solutions experts are available to help you navigate the financial, legal, and tax aspects of purchasing your future property.

Your financial partner considers the purchase price and its own property valuation. Consequently, the asking price may only sometimes align with the property's appraised value. If your financial institution values the property lower than the sale price, you must cover the difference between the lower value and the purchase price with your funds.

For example, if the property you're interested in costs CHF 1,000,000, but your financial institution appraises it at CHF 900,000, the maximum mortgage they may offer is CHF 720,000 (80%). Your equity contribution would then be CHF 280,000, plus notary fees of approximately CHF 50,000 (5%), totalling CHF 330,000. It's crucial to assess the property value you intend to buy carefully. Could you review the proposed purchase price, considering its actual value, including any potential renovation or repair costs?