Swiss Property Finance

New Finance

The first distinction to make is whether you are a citizen of the EU, EFTA or a country that Switzerland has a bilateral social security agreement with. If this is the case then you will be eligible to receive the government pension once you reach retirement age.

Normal retirement age is 64 for women and 65 for men. However, you may draw your OASI pension up to two years before this age. You may also defer receiving benefits for up to five years after normal retirement age. Both options will have an effect on the pensionable amount you would receive. You are not able to reclaim contributions made into the scheme at any time, only benefits from the scheme.

If you are not a citizen of a country listed above and are leaving Switzerland permanently then you may have the right to receive back all of the contributions that you have made (both from your side as well as your employers) during your employment in Switzerland. If this is the case then please contact your financial advisor before leaving the country to understand your options.

Pension: Government (OASI)

In most instances a persons Pillar 1 contributions will end when they leave Switzerland. There may, however, be exceptions to this rule. For some people there could be a significant benefit in continuing to contribute to both the Old Age and Survivors Insurance scheme (OASI) and the Disability Insurance (DI), which could allow them to receive a full government pension upon retirement and remain protected against disability whilst they remain working.

To have the option of paying into and receiving benefit from both schemes when you leave the country certain restrictions apply. You would need to either be a Swiss citizen or a citizen of an EU or EFTA (European Free Trade Association) country or of a country which Switzerland has a bilateral social security agreement with(https://www.ahv-iv.ch/p/890.e). Also, you must be registered with the Swiss social security system (AHV/AVS) and have been contributing to the scheme for a least five years without interruption.

Finally, the country that you are moving to cannot be within the EU, EFTA or a country that Switzerland has a bilateral social security agreement with.If the above applies then you may have the option to keep making OASI and DI contributions. This is a fixed amount per year, based on your annual income, and is set at a percentage of your salary. It is important to remember that, unlike when you are resident in Switzerland, this contribution would likely not be tax deductible.

As Switzerland does provide a high level of protection (disability and pension) this is an important area to consider when you begin planning to leave the country. It is always best to seek the advice of your financial advisor on all matters before you leave.

There are many reasons that Swiss home purchase can be appealing – from escaping high rental prices to the allure of owning a stable asset. However, purchasing a property in Switzerland first requires an understanding of the rules. The loan/mortgage structure is unique, the cost and fees are relatively high and there are many ways to structure and repay your loan.

As one of our main areas of expertise, we have the knowledge and experience to help you understand the whole buying and financing process and the options available to you. We also have access to the domestic market of providers, which means that we can gather quotes from each lender and find offers tailored to your specific needs.

We don’t just act as a market comparison company; instead we find out why you are purchasing (home, investment or otherwise) before advising on the best strategy of purchase and repayment for you.

We utilise the most efficient debt structures, tax exemptions and discounted deposits to ensure you have the very best loan structure for your given circumstances. Also, our in-depth knowledge of the local mortgage market will help us find you not just the lowest interest rates available, but the best suited lender for you now and in the future.

Why MWC for property financing?

Independent and unbiased: unrestricted access to Swiss banks and insurance companies
No fee or obligation consultation and affordability assessment
Integrated advice to your overall financial planning
Preferential rates available through preferred lenders
Sophisticated deposit and amortisation strategies using 2nd and 3rd pillars
Interest rate and tax structuring optimisation
Negotiation and administration on your behalf
Finance through leveraging your investment portfolio available
Ongoing support and assistance

Some Commonly Asked Questions

I am not a Swiss Citizen, can I buy a property in Switzerland with a work or residence permit?

Switzerland has strict regulations about the purchase of properties by foreigners. Generally speaking you can purchase a primary residence with a Swiss B permit, however, the rules differ from canton to canton. You can buy any property if You are an EU or EFTA national with a Swiss residence permit who resides in Switzerland You hold a Swiss C Permit In either case you will have the same rights as a Swiss citizen to purchase property. In addition to a primary residence you would be able to buy business premises, investment properties or a holiday home. If you are not a citizen of an EU or EFTA country, but hold a Swiss B Permit, you may purchase a residential property, but this must be to live in and not for rental purposes. Owning a property does not ensure you will receive a residence or work permit in the future. You may not be able to rent this property should you leave Switzerland – the rules can vary from canton to canton.
How much money can you borrow in Switzerland?

Lenders in Switzerland will typically require that your monthly gross income is at least three times the amount required to repay your home loan. However, the interest rate used to calculate the repayment amount is normally 5% per annum, which can be significantly higher than the interest rate that you would end up paying. The calculation also includes maintenance or insurance charges, so the income requirement may be higher than elsewhere for a loan of the same value. Please contact us to find out exactly how much you may qualify to borrow.
Minimum deposit

Swiss guidelines call for a 20% minimum deposit. The government has been tightening regulations since the 2008 ﬁnancial crisis and in response to low interest rates, which have raised concerns about unsustainable lending, rising property prices and the risk of a property bubble forming. For the 20% deposit, at least 10% of the purchase price must be put down by the buyer in cash. The other 10% can be arranged using your Swiss occupational pension (Pillar 2) as collateral. Any cash equivalent down payment may come from savings, investments or Pillar 3 pension plans.
Why do Swiss banks require 2 mortgages for one property?

Swiss mortgages are divided into two separate parts Part 1. This mortgage accounts for 2/3 of the purchase price of the property. The capital is normally never repaid, thus it is an interest-only loan. There are various beneﬁts to having an interest-only mortgage in Switzerland, especially in a low interest rate environment. Please consult your advisor for more information. Part 2. This mortgage accounts for 1/3 of the purchase price of the property. This part must be repaid to the bank. Normally you will immediately repay 20% of this mortgage via the deposit you place on the property. This would leave 15% to repay, which is normally paid back over 15 years or by 65, whichever is less.
How do I amortise my mortgage?

Part 1 of your mortgage will normally be paid back monthly in cash. Part 2 of your mortgage may be paid back using direct or indirect amortisation. In the case of direct amortisation, your loan is paid back at regular intervals on a capital and interest basis. This means your mortgage is reducing over time and guarantees the repayment of this loan as long as payments are maintained. If you chose to use indirect amortisation you pay the interest on the loan, but do not make capital repayments. Instead, the equivalent capital repayments are placed into a 3rd Pillar pension. The beneﬁt here is that your money is invested for growth over this time period. Plus, you have the ability to include life and disability insurances, which can ensure this loan amount is covered under any such circumstance arising. At the end of the 15 year term or when you are 65, whichever is sooner, these 3rd pillar funds will be used to pay off this loan amount.
What about taxation?

Taxation is another important factor to take into consideration when setting up your mortgage. Mortgage interest on your main residential home may be deducted from your annual income tax bill. This, therefore, adds weight to the case for using indirect amortisation, due to the interest amounts remaining level. A counter tax is charged against the theoretical rental income of your property. In many cases both taxes will be close to equalling each other off and this is a reason why many people will prefer to keep the 1st mortgage as interest only and not pay back the capital over time. Please consult your advisor for speciﬁc information.
How do I arrange a mortgage?

The route that most people take in Switzerland is to consult their bank. This has a benefit, in that your bank already have a relationship with you and have an idea of your financial capacity. With this being said, such a relationship would not normally save any time on the consultation and application process. As an independent advisory company we have a relationship with 40 different home lenders. This allows us to work with our clients, establish what their specific needs are before researching the market and then finding them the best offer available. Additionally, in many cases, we are able to negotiate preferential terms over the lenders advertised rates. As an expat there are many different rules and requirements that must be met in order to buy a property and obtain a loan in Switzerland. These rules also vary from canton to canton. Our main area of expertise lies in helping the international market so please contact us to find out how we can help you.