Mortgage Comparison Switzerland

A variable mortgage does not have a fixed interest rate – the interest rate continuously adjusts to market conditions. The bank can increase or decrease it depending on the market interest rate level, usually with prior notice. There is no fixed term, and the mortgage can generally be repaid in full or in part with a notice period (e.g., 3 to 6 months). It offers high flexibility but little planning security, as costs fluctuate. With falling interest rates, it is often cheaper; with rising interest rates, it becomes more expensive. The interest burden is difficult to predict. Variable mortgages are less common today than SARON or fixed-rate mortgages. They are suitable for individuals with high financial flexibility or short-term financing needs.

A fixed-rate mortgage is a mortgage with a fixed interest rate over a specified term – typically between 2 and 10 years. During this period, the interest rate remains unchanged, regardless of how market interest rates develop. This offers high planning security, as monthly costs remain stable. Fixed-rate mortgages are particularly suitable for individuals who want to count on consistent costs long-term. The longer the term, the higher the interest rate usually is. After the term expires, the mortgage must be extended, repaid, or renegotiated. Early termination is usually only possible with high costs (early repayment penalty). Fixed-rate mortgages are one of the most popular mortgage types in Switzerland. They offer protection against rising interest rates but are less flexible when interest rates fall.

In Switzerland, you must contribute at least 20% of the property’s purchase price as equity. Of this, at least 10% must come from “hard” equity – i.e., from savings or securities, for example – and must not come from pension fund assets (Pillar 2). The remaining 10% can be contributed, for example, via the pension fund (advance withdrawal or pledging). The more equity you contribute, the lower the mortgage and thus the interest burden will be. In addition, banks often require higher equity for holiday homes or investment properties.

Affordability shows whether you can afford a property long-term. Banks check whether the ongoing costs – i.e., mortgage interest, amortization, and ancillary costs – do not exceed your income. As a rule of thumb: These costs must not exceed 33% of your gross income. For calculation, banks often use a notional interest rate of around 4.5–5% (not the current market interest rate) to account for future interest rate increases. Additionally, they calculate with annual ancillary costs of about 1% of the purchase price. If affordability is not met, the bank usually rejects the financing or demands more equity. The goal is to minimize financial risks for you and the bank. Affordability is a central criterion for mortgage lending in Switzerland.