What You Need to Know about Buying a Home in Switzerland

Would home ownership be the best step forward for you?

Published in

GOKONG

6 min readSep 10, 2019

Are you planning to live in Switzerland long-term? Would it therefore be a good idea to buy rather than rent a home while you’re living and working here? Do you dream of owning your own home in Switzerland?

The answers to these questions will of course depend on your current circumstances and future plans.

Home ownership is less common in Switzerland than in most other countries, with only 37.4 per cent of residents owning their homes. The home ownership rate varies across the country, from just 16 per cent in Basel-City to 57.2 per cent in Valais.¹

The requirements for buying a home in Switzerland may be different from those in your home country. There may also be differences in the buying process. Here’s what you need to know before deciding to buy a home in Switzerland.

A Down Payment of 20% is Required

In almost all cases, you’ll need to provide a down payment of at least 20 per cent of the market value of the home, with the remaining 80 per cent or less being funded by a mortgage.

Although this is a much higher proportion than in some countries, only 10 per cent of the property’s value has to be provided in cash.

The remaining 10 per cent can be funded through your pension fund. This must be a Swiss company or personal pension fund.

There are two ways of using your pension fund to finance part of the down payment on your home:

Withdrawing the required amount of money from your pension fund
Pledging your pension fund.

If you withdraw the money from your pension fund, the balance of your pension fund will be reduced but you’ll pay less interest on your mortgage, because you’ll borrow less money.

If you pledge your pension fund, you’ll pay more interest on your mortgage and your entire pension fund will be at risk if you’re unable to pay your mortgage at some point in the future.

Two Mortgages on One Home

One of the features of the Swiss system is that you usually take out two mortgages in order to buy one home.

The first mortgage funds between 60 and 70 per cent of the home’s purchase price and often does not have a defined repayment period. It carries a lower interest rate than the second mortgage.

The second mortgage finances the gap between the down payment and the first mortgage and has a fixed repayment period, which is generally 15 years or your expected date of retirement. The interest rate on this mortgage is higher than that on the first mortgage.

Average Mortgage Rates are Low

In July 2019, the average five-year mortgage rate was just 1.13 per cent, rising to 1.77 per cent for a ten-year mortgage, according to Credit Suisse.

The exact rate you’ll pay will depend on:

Your lender’s rates (mortgage rates can vary from lender to lender)
Your financial history
Your circumstances and your likely ability to repay the whole of your mortgage.

Repayment Periods Can Be Long

In contrast with repayment periods of 20 to 30 years in many other countries, repayment periods are usually longer in Switzerland, with mortgages of between 50 and 100 years being fairly common.

Who Can Buy a Home in Switzerland?

If you’re a non-Swiss national with a residency permit B or C, you’re free to apply for a mortgage in Switzerland. Joint mortgages are available, so you can buy a home with your partner.

Lenders require you to have a monthly income of at least three times your mortgage repayment. Sometimes, maintenance and insurance costs are included in this calculation, so you may need to earn more than three times your mortgage repayment.

If you’re paid 13 times a year, declare your total annual salary rather than your normal monthly salary.

If you don’t have a Swiss residency permit, different rules apply. In general, you’d need to apply for a licence from the cantonal authority in the area where you’d like to buy a property.

How to Apply for a Mortgage in Switzerland

Most mortgages are arranged directly with banks. Cantonal banks usually only offer mortgages to people who live in that canton. So, if you were to move to another canton at a later date, you’d need to transfer your mortgage to the cantonal bank in the area you’re moving into.

It might therefore be a good idea to arrange a mortgage with one of the major Swiss banks, such as:

Credit Suisse
Raiffeisen
UBS.

When applying for a mortgage, you’ll need to supply:

Proof of residence in Switzerland
Proof that you have sufficient funds to cover your down payment
Evidence that you’ll be able to afford the repayments.

Extra Costs of Buying a Home

As in most other countries, there are extra costs associated with buying a home. These include:

The notary fee — this can range from 0.2 per cent to 1 per cent of the purchase price.
Property transfer tax in most cantons (excluding Schwyz) or change of ownership and registration fees in six cantons — these vary from canton to canton and can be consulted online.²
The fee for registering the property’s deed with the land registry office — this may be shared by the buyer and seller, but the buyer foots the bill most of the time. It can range from 1 per cent to 1.5 per cent of the purchase price.
Registration of the mortgage.

As a guide, all these extra costs can add up to around five per cent of the home’s purchase price or more. You’ll need to have this money available in addition to the down payment.

Ongoing Costs of Home Ownership

There are several ongoing costs of home ownership, so it’s a good idea to find out or estimate how much each cost will be when deciding whether to buy a property.

The ongoing costs include:

Service charges — these often apply to detached houses, as well as apartments, to cover the maintenance of private roads, shared parking spaces and communal areas.
Insurance
Local property taxes (also known as land or real estate taxes) — these are paid in most cantons and can vary a lot.³
General property maintenance costs — these are sometimes estimated at around 1 per cent of the home’s purchase price.

Tax Considerations when Buying a Home

Since property is considered to be an asset, both income and wealth taxes are payable on it in Switzerland.

Your home’s rental value will be added to your income and you’ll pay income tax on the total.

However, the following costs are deductible from your income tax:

Mortgage interest (fully deductible)
Maintenance costs (partly deductible).

You may also have to pay wealth tax on your home. Each canton has somewhat different methods of calculating the wealth tax.

How Long Does it Take to Buy a Home in Switzerland?

The whole process of buying a home, from making an offer to moving in, can take three months or longer.

Should You Buy a Home in Switzerland?

There are many factors to take into account when deciding whether to buy or rent a home.

If you’ve decided to settle in Switzerland for the foreseeable future, buying your own home may be important for you.

However, purchasing a home may not be a good idea if you’re planning to stay for less than five years, both because of the initial costs and because you’d have to pay property gains tax and real estate agency commission if you sold your home.

Renting out your home might be an option if you had to leave Switzerland unexpectedly in the future, but your capital would of course remain tied up in the property.

Buying a home in Switzerland can be a worthwhile long-term investment but it is a large financial commitment, so it’s important to take some time to consider whether it’s the best step forward for you at the moment.