Loan — meaning, own resources and calculation
What does loan mean? The definition
Loan is the relationship between the mortgage amount and the value of a property. In addition to the affordability calculation, repayment in Switzerland is a decisive factor in loan approval. For self-used objects, the loan may not exceed 80 percent of the loan value. The mortgagee must raise at least 20 percent equity to build, buy or convert a property. Unowned real estate, such as investment properties, requires an equity share of 25%, and banks may loan these properties up to a maximum of 75%.
Tip: The lowest value principle is decisive for setting the loan value. If there is a difference between the purchase price and the market value set by the bank, the lower value applies.
How does the Division into First and Second Mortgages work?
In Switzerland, when the loan is high, the mortgage sum is divided into two mortgages. For owner-occupied residential property, the first mortgage is limited to a maximum of 65 percent. The remaining 15 percent is covered by the second mortgage. In the case of owner-occupied real estate, only the second mortgage must be repaid within 15 years or until retirement age. A loan of 65% may also be maintained in the long term. Investors in investment properties are required to amortize the mortgage debt to 2/3 of the loan value within 10 years.
Important: After the second mortgage has been repaid, there is less interest on the first mortgage, but the tax burden rises as less debt interest can be deducted from taxable income. When concluding a contract, you should pay attention to the terms: If the first and second mortgages expire at the same time, it is easier to switch to another bank. However, if interest rates have risen at this point in time, the entire mortgage will also become more expensive.
Do own funds have to come from assets?
The legislator lays down detailed rules regarding the origin of the necessary own funds for an owner-occupied home. At least 10% of own funds must come from the mortgagee's own assets, i.e. from balances in a bank account, savings or securities. Interest-bearing loans are not considered equity. Only after this share has been paid can further own funds be withdrawn from the Pillar 3a retirement account or the pension fund (BVG):
- Pillar 3a capital: Money from Pillar 3a can be used every five years to buy, convert or renovate owner-occupied property.
- Pension fund assets: Insured persons can draw up to 50% of their current pension capital to purchase owner-occupied residential property.
Important: Investors may not use funds from the 2nd pillar or from pillar 3a to finance an investment property. These funds are available exclusively to finance owner-occupied residential property.
How do you calculate the maximum mortgage?
In order to calculate the amount of the mortgage, the loan value is decisive. This corresponds to the lower value of the bank's purchase price and market value valuation. The loan value and the maximum loan should be obtained from the bank. The maximum mortgage is calculated using the formula:
[\ text {loan value}\ times\ text {maximum loan in percent} =\ text {maximum mortgage}
Exemple: [800,000,\ text {CHF}\ times 80% = 640,000,\ text {CHF}] In this example, the maximum mortgage with an 80% loan is 640,000 CHF. In addition, equity of 20% (here: 160,000 CHF) is required.
In this example, the maximum mortgage with an 80% loan is 640,000 CHF. In addition, equity of 20% (here: 160,000 CHF) is required.
Important: In addition to the loan, affordability also has a significant influence on whether the bank may grant a mortgage. Read our PORTABILITY article.
.png)