The main cost of buying a house in Switzerland is typically your mortgage. In Switzerland, the general costs of mortgages are controlled by Swiss banks who set levels of repayment as well as guidelines on overall costs. The amount you must pay for your mortgage is determined by its type, length, and the amount you have borrowed. Before you find your ideal home through a real estate agent, it is essential to know what you can afford as buying a house can have a significantly higher initial cost than renting a house or apartment.
What are the costs involved in getting a mortgage in Switzerland?
The upfront costs of a mortgage are divided into three categories. Each bank has its own set of regulations governing cost, but generally, banks tend to follow the same metrics for charging their mortgages.
Universally, most mortgage providers require you to put a down payment or deposit on your mortgage. This is taken as the basis for your mortgage and will be used to calculate what you can afford. In 2021, the regulations are that you must pay 20 percent of your house price upfront in order to secure a mortgage of any type. This, however, can be compensated by a higher mortgage premium in a combined mortgage.
Basic mortgage repayment
In Switzerland, you are expected to pay off your mortgage gradually. The amount that you must pay varies greatly from provider to provider. When deciding on your repayment rate, your bank or mortgage provider considers your age, wage from work or amount of pension, financial history, family and purchasing history. On average, repayment rates can range between 1 and 4 percent of the house's purchase price a year.
Mortgage interest is the monthly or annual fee that you must pay on top of the principal repayment in order to pay off your mortgage. This is a payment that lasts until you have successfully paid off your mortgage and the amount you pay is influenced by national interest rates and what type of mortgage you have selected.
The Swiss National Bank determines the interest rate on mortgages as part of its policy rate. As of 2021, this figure is -0,75 percent. The guide interest rate taken by UBS and Credit Suisse and used by the majority of banks are as follows:
- Fixed-rate mortgages at 1 to 1,8 percent
- Variable-rate mortgages at 2,8 percent
- SARON or LIBOR mortgage 1,05 to 1,10 percent
Service charges and administrative fees
The final amount that you must pay relates to the administrative fees from the bank or mortgage provider. These are payments for the handling of your mortgage, the processing of payments and customer services. Prices do vary, but an average estimate is around one percent of the house value a year.
Example Swiss mortgage fees
With a large number of different fees and repayments, it is important to know what you can afford. The way to think about what you can afford is to assume that the amount of mortgage you pay will be the same amount as the maximum amount of rent you could pay in a rental contract. Estimates vary but a general rule for living in Swiss cities is 33 percent of your annual income spent on rent or mortgage repayments. An example payment sheet is below.
Bear in mind that this does not include taxes from the government and interest rates change on a regular basis.
Swiss mortgage example
Below is an example based on a property value of 1.000.000 Swiss francs.
- Deposit: 200.000 Swiss francs
- Mortgage: 800.000 Swiss francs
- Interest rate at 1 percent (example): 10.000 Swiss francs a year
- Repayment rate of 1 percent: 10.000 Swiss francs a year
- Additional costs: 10.000 Swiss francs a year
- Total cost: 30.000 Swiss francs a year or 2.500 Swiss francs a month
- Required salary: 90.000 Swiss francs a year
It is also important to bear in mind that mortgages are tax-deductible when filing your tax return.
What if I cannot afford my mortgage?
The process around renegotiating a mortgage is dependent on how long you have paid into the mortgage and how much you can still afford. Liability for paying for a mortgage is on the buyer, therefore most banks will offer competitive terms in order to resolve the issue, usually extending the amount of time you have to repay or switching to a variable rate mortgage. However, do bear in mind if you are found to have misled or lied on your mortgage application, you may be foreclosed upon.