I'm a foreign resident in Switzerland. Can I buy property here?
If you are a citizen of an EU or EFTA country or a third-country national and already rent 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 without requiring special authorization.
How do mortgages work in Switzerland?
As a general rule, the mortgage lender will finance a maximum of 80% of the market value of the property. You will have to contribute at least 20% of the purchase price as equity yourself. At least half of that amount must be your own funds and not taken from your employee benefits insurance.
This can comprise savings and securities holdings, pension capital, life insurance, gifts or inheritance advancements.
Mortgage financing is normally divided into a first mortgage and a second mortgage.
The first mortgage can cover up to a maximum of 66% of the purchase price. If your need for financing exceeds that percentage, then you will need to take out a second mortgage to cover the remaining amount.
The second mortgage has to be repaid in regular instalments over a maximum of 15 years before you reach the age of 65.
What is affordability and how is it calculated?
Affordability is quite a simple calculation of your income versus the property costs. As a basic rule to estimate affordability, the cost of the property should not exceed one third of the borrower's gross income. Let’s see what that means more in detail.
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. Many financial institutions use a theoretical rate of 5% to calculate the mortgage interest to ensure that the mortgage would still be affordable if interest rates were to rise.
Yearly maintenance and ancillary costs such as utilities, insurance, and minor repairs, are then added to this at a general annual rate of 1% of the market value.
Mortgage types & repayment
In Switzerland, clients can generally choose from four different mortgage types. A good advisor will determine your risk profile with you so that you can make the appropriate choice.
You can even save money when repaying your mortgage, depending on how you do it. With direct repayment, you pay the mortgage back to the bank in regular instalments. With indirect repayment, the instalments are paid into a tied pension provision account or safekeeping account or into a life insurance policy. The latter option allows you to benefit from consistent tax deductions throughout the mortgage term, provided interest rates do not change.
Ready for the next step?
If you're looking for more information on the mortgage system in Switzerland and how you can use your insurance policies to finance or secure your mortgage, Hello Switzerland's insurance partner Helvetia is ready to answer any and all questions you might have.
Schedule a free, non-binding consultation with one of Helvetia's English-speaking advisers who are specialised on the insurance needs of international professionals in Switzerland.Schedule free consultation