Financing a home in Switzerland: the complete guide

Equity: 20 percent practice, 10 percent rule

The widespread rule of thumb of 20 percent equity appears in no rulebook — it follows arithmetically from the usual loan-to-value limit of 80 percent (banking practice). Binding as a FINMA-recognised minimum standard is the core: at least 10 percent of the lending value must come from equity that does NOT stem from the 2nd pillar — neither from a withdrawal nor from a pledge (SBA minimum requirements, section 2.1).

Under the same guidelines, equity includes among other things:

• savings, account balances and securities (including pledged ones),
• pillar 3a assets — even merely pledged — as well as surrender values of insurance policies,
• advances on inheritance and gifts,
• loans assigned to the bank or subordinated; for owner-occupied homes, under conditions, also loans from the close family circle.

The most important distinction: 2nd-pillar assets (pension fund) NEVER count towards the 10 percent hard equity — pillar 3a assets do. If the purchase price exceeds the bank's lending value, the difference must additionally be financed entirely from funds outside the 2nd pillar (SBA minimum requirements, section 2.1).

Loan-to-value: the lower-of-cost-or-market principle and the 80 percent practice

The purchase price is not automatically decisive: the lending value is in principle the LOWER of market value (bank valuation) and purchase price — the lower-of-cost-or-market principle (SBA mortgage-lending guidelines, section 4.3.1). Since 2025, ordinance law additionally requires that the lending value, once set, be kept for five years (CAO Art. 72b) — interim value gains therefore do not raise the loan-to-value on an ongoing basis.

The 80 percent loan-to-value limit itself is banking practice: the guidelines only require each bank to set its lending limits internally. The practice nevertheless has a regulatory anchor — the Capital Adequacy Ordinance makes residential loans abruptly more expensive for the bank once the loan-to-value exceeds 80 percent (CAO Annex 3).

The amortisation rule produces the classic two-part structure:

Affordability: the principle — and why the 33 percent is not a law

Banks check whether housing costs fit the income in the long term. The widespread formula: an imputed interest rate of around 5 percent on the whole mortgage, plus around 1 percent of the property value for maintenance and running costs, plus the amortisation of the 2nd mortgage — together at most around one-third of gross income.

All three figures are common banking practice and appear in no rulebook — not in the SBA guidelines and not in the Capital Adequacy Ordinance. Since 2025, the CAO merely requires each bank to ensure affordability sustainably and systematically via internal directives, based on prudently determined imputed costs — without a numerical requirement (CAO Art. 72d). The Swiss National Bank accordingly describes the 5-percent-one-third formula as practice "typically applied" by banks.

For a sense of magnitude — illustrative, following the common practice formula:

Amortisation: the 15-year rule

Binding as a FINMA-recognised minimum standard: the mortgage must be amortised LINEARLY to two-thirds of the lending value within at most 15 years; amortisation starts at the latest at the end of the quarter twelve months after payout (SBA minimum requirements, section 2.2). The often-heard formula "by retirement", by contrast, is not in the rulebook — it is the practice of individual banks.

There are two ways to get there:

1. Direct amortisation

   Regular repayment of the mortgage — the debt and with it the interest burden fall continuously; the tax-deductible debt interest falls as well.

2. Indirect amortisation

   Paying into a pledged vehicle instead of repaying — the SBA guidelines expressly mention paying into and pledging pillar 3a assets or life-insurance policies. The debt remains; the saved-up assets cover the amortisation at the end.

Which form suits a situation for tax and financial purposes is individual — both are compliant with the rules (SBA minimum requirements, section 2.2).

Mortgage models: fixed, SARON, variable

Three basic models shape the market. The comparison is purely structural — which interest commitment suits a situation is individual, and this page deliberately says nothing about future interest-rate developments:

Using the pension fund for the home: the withdrawal rules

2nd-pillar assets may be used for owner-occupied residential property at the place of residence or habitual abode (home-ownership promotion). Statutory and ordinance law governs the withdrawal:

• Minimum amount CHF 20,000; a withdrawal is possible every five years (WEFV Art. 5).
• Possible until three years before entitlement to retirement benefits arises; from age 50 the amount is capped (BVG Art. 30c).
• Married persons and registered partners need the WRITTEN consent of the spouse or partner (BVG Art. 30c para. 5).
• The withdrawal reduces retirement benefits; for gaps in death and disability cover, the fund must offer or arrange supplementary insurance (BVG Art. 30c para. 4).
• A restriction on sale is noted in the land register; on a sale, the withdrawal must be repaid (BVG Art. 30d/30e).
• The withdrawal is taxed immediately as a lump-sum benefit (BVG Art. 83a; federal level: one-fifth tariff under DBG Art. 38, cantons: own tariffs). On voluntary repayment — at least CHF 10,000, possible until entitlement to retirement benefits arises — the tax paid is refunded on request; the request lapses three years after the repayment.
• Interaction with buy-ins: after a home-ownership withdrawal, voluntary buy-ins are only permitted once it has been repaid, and benefits resulting from buy-ins may not be drawn as capital for three years (BVG Art. 79b para. 3).

The financing trap: even with a pension-fund withdrawal, at least 10 percent equity is required that does NOT stem from the 2nd pillar (SBA minimum requirements) — pension-fund assets can never fill this quota.

Pledging instead of withdrawing: the second route

Instead of drawing capital, the entitlement to pension benefits or an amount up to the vested benefits can be pledged (BVG Art. 30b). Pillar 3a also allows pledging for home ownership (BVV 3 Art. 4 para. 2) — pledged 3a assets even count among the permissible equity components. The two routes compared by feature:

For pillar 3a, NO minimum amount applies to the home-ownership withdrawal — the details of the 3a withdrawal are in the pillar 3a guide (the CHF 20,000 concern the 2nd pillar).

Withdrawing pillar 3a for home ownership: the rules in the pension guide →

Staggered withdrawal and the lump-sum withdrawal tax: the retirement guide →

Closing costs: what comes on top of the purchase price

In addition to the purchase price, one-off levies and fees apply — all regulated at cantonal level:

The property transfer tax is a tax of the cantons and partly the municipalities; the federal government levies none. In most cantons the rates are between around 1 and 3.3 percent of the purchase price; some cantons — such as Zurich, Glarus, Zug and Schaffhausen — only levy notarisation and land-register fees instead of a tax (FTA dossier on the property transfer tax). Cantonally regulated notary and land-register fees come on top.

On a later sale, the cantonal real-estate capital gains tax applies to the gain. If the proceeds are used within a reasonable period for an equally used, owner-occupied replacement property in Switzerland, taxation is deferred (StHG Art. 12 para. 3); what counts as a reasonable period is a matter of cantonal law and practice.

Blanket totals such as "3 to 5 percent closing costs" are market practice without an official basis — the tariffs of the respective canton are decisive.

Taxes around the home: today — and from 2029

Up to and including the 2028 tax year, the current system applies: the imputed rental value is taxable as income (DBG Art. 21), private debt interest is deductible up to taxable investment income plus CHF 50,000 (DBG Art. 33), and maintenance costs can be deducted effectively or as a lump sum (DBG Art. 32).

From 1 January 2029 the system changes fundamentally: the popular vote of 28 September 2025 approved the system change, and the Federal Council has set its entry into force for 2029. The imputed rental value is abolished; in return, the maintenance deduction and largely the debt-interest deduction for owner-occupied homes fall away.

In depth: the abolition of the imputed rental value 2029 — what was decided and what applies from when →

How financing, pension assets and taxes interact in your situation is something we are happy to discuss with you — with no obligation.