How to obtain a mortgage in Switzerland
May 18, 2019
A mortgage loan is granted by a financial institution to a person wishing to become owner, in order to finance his property. The property is then used as collateral against the risk of non-repayment of the loan.
The different types of mortgages
On the Swiss territory, there are several types of mortgages whose rate level will mainly depend on several factors: the solvency of the debtor, the interest rate on the current market, the importance of credit, and its duration. There are three main types of mortgages in Switzerland:
Variable mortgages, which have no fixed maturity and allow some flexibility. Their interest rate adjusts to the real market conditions. They can be terminated fairly quickly and are not limited in time.
Fixed mortgages, which are the most common and whose deadlines and rates are fixed at the time of the conclusion of the loan agreement. Their duration is between 1 year and 15 years. The interest rate remains fixed throughout the duration of the loan agreement.
Libor mortgages, oriented towards the European Money Market Libor, whose interest rate fluctuates over the entire duration of the loan while generally being more advantageous than that of the fixed mortgage. Their duration is 3 years.
The procedure of concluding a mortgage
To become an owner in Switzerland, you will certainly resort to a mortgage. The mortgage system is a multi-step process:
First of all, you must sign a sales agreement on the real estate you want to buy. This compromise will include a suspensive clause, the terms of which will be decided jointly with the seller to define the date on which you must have obtained the loan. Without obtaining a loan on the fixed date, the sales agreement can be canceled.
Once the sales agreement has been signed, you will need a financial institution specializing in mortgage lending, who will be able to guide you in choosing your loan. Regarding its amount and duration, it will identify the type of mortgage that will suit you best according to your situation at the time of application, if you are retired, employee or trader for example. It should be noted that investors and future owners of mortgages are under the protection of the Federal Financial Institutions Act, known as the LEFin Act, the purpose of which is to "protect investors and customers of financial institutions and ensure smooth operation and stability of the financial system. Based on this essential information, your financial institution will be able to determine the amount of credit it can give you.
In the last ten years in Switzerland, mortgage holders have benefited from historically low interest rates. The financial experts consider that the monetary policy of the Swiss National Bank will continue to favor a rate evolution favorable to customers.