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Mortgages are a great opportunity for home ownership in Switzerland. Behind this financial mechanism, which may seem complex, often lies the possibility of advantageous financial arrangements. In particular, mortgages can provide access to a loan without the need for other collateral.
To better understand this mechanism, you need to know the different types of mortgage. The specifics of the Swiss market also need to be mastered at your fingertips.

Definition of a mortgage

A mortgage is a financial operation whereby you use real estate as collateral for a loan. traditionally, this may involve pledging the home you wish to buy with the loan. You can also choose to mortgage a property you already own.
Mortgages offer real guarantees to the lender. Indeed, it has the certainty of being reimbursed for the value of the property, in the event of default on your part.

Choosing your mortgage

Mortgages are mainly distinguished:
  • The amortizing mortgage, with which you repay part of the capital amortization and the interest associated with the loan each month.
  • The in fine mortgage, with which you repay only the interest each month, then the entire capital at the end of the loan.
  • The mixed mortgage, under which you repay only the interest during a first period, then the capital during a second.
To choose your formula, the support of a professional remains essential. He'll be able to tell you which formula corresponds to your profile or allows you to make the best savings.

Specifics of the Swiss mortgage

Taking into account the value of the property

Swiss banks do not press beyond 80% of the value of the property the customer wishes to buy. This means I'd want to bring in equity for the remaining 20%.
The most important piece of information, if you want to use a mortgage, is the estimated value of the property. This, also known as the collateral value, enables the bank to know to what extent the property secures the credit you wish to take out.

Limited risks

The risks are often quite limited, when a bank grants a mortgage. In Switzerland, the value of the price is generally equivalent to two-thirds of the property, with the remainder having to be financed by equity. This risk limitation for financial organizations makes it possible to obtain a credit.
However, you'll need to meet a number of other criteria. For example, the total cost of your loan must not represent a monthly payment exceeding 33% of your income. Elements relating to your profile or even your professional situation will also be taken into account.

The Swiss real estate market

It's important to note that in Switzerland more than anywhere else, homeowners generally sell their property for more than the sum they originally invested. Here too, this is an essential point, taken into account by the banks. In the event of default on your part, it is therefore highly possible that the property will cover more than you borrowed. This is why this solution is so popular.

How to repay a mortgage

The Swiss mortgage must be repaid over a maximum period of 20 years point it is important to emphasize that a subscriber over 70 years of age must imperatively repay the sums due before his or her 90th birthday.
The repayment terms depend on the mortgage you choose. With no amortizing mortgage, you repay your loan every month. If you've opted for an in fine solution, the entire capital will be repaid at the end of the loan term.

Fixed or variable mortgage rate?

Most borrowers opt for a fixed rate. It will be defined at the time of underwriting, and will remain the same until the mortgage matures.
A variable rate remains an alternative, however, if you want to take advantage of market trends. If it's falling, yours will be revised. On the other hand, if it's rising, it's possible that the cost of your mortgage will increase.
You may have heard of the SARON mortgage, where the rate is calculated on a daily basis.

How to get a mortgage?

To get a mortgage, you can start by running a simulation on an online calculator point you can then put together your file, and go to different lenders.
The simplest solution, to study the viability of your project, remains the call to a consulting firm. We put our expertise to work to ensure your project's success. You can also take advantage of our network, to obtain the best rates and conditions.
Valery Chantepy
Updated on: 31.01.2024Written by Valery ChantepyHead of mortgage department at Comparea
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