A mortgage never covers the whole amount: it is this share of equity that concretely determines access to ownership.
Three further elements complete this calculation and are regularly underestimated:
Acquisition costs come on top of the deposit. Notary fees, registration duties and land registry fees amount to several percent of the price depending on the canton, and cannot be financed by the mortgage.
Affordability decides as much as the deposit. The notional housing costs must not exceed about one third of gross income, calculated at a notional interest rate of 5%. Income level therefore weighs as much as the capital available.
Requirements rise with the type of property. A second home or an investment building requires significantly more than 20%.
This guide is for buyers, first-time buyers and experienced owners alike, who want to measure precisely how much equity they need before submitting a bank application. It covers the sources available, the bank’s assessment method and the levers for strengthening a financing plan.
Equity, borrowed funds, hard funds: the distinctions to know
Equity refers to all the resources the buyer contributes personally. It complements borrowed funds, meaning the mortgage granted by the bank, which is repaid with interest.
Within equity, banks make a decisive distinction.
Hard equity means assets that are immediately available and free of any occupational pension constraints: savings, cash, securities, pillar 3a, gifts and advances on inheritance. These must cover at least 10% of the property’s value.
Funds from the 2nd pillar are sometimes described as soft equity. They are accepted, but can never make up the whole deposit, and drawing on them is governed by specific withdrawal or pledging conditions.
For a property worth CHF 1’000’000, the typical structure is CHF 200’000 of equity and a CHF 800’000 mortgage, an 80% loan-to-value ratio.
Swiss requirements for a main residence
The rules applied by banks are based on the guidelines of the Swiss Bankers Association and on the framework for encouraging home ownership.
Minimum 20% equity. Lenders finance up to 80% of the lending value. This is the value the bank applies after its own valuation, and it may be lower than the price agreed with the seller. The difference is then financed entirely from equity, on top of the 20%.
Of which at least 10% in hard equity. This is the rule that blocks the most applications among households whose savings are mainly occupational pension.
Acquisition costs on top. Notary fees, registration duties and land registry fees vary by canton and do not count as equity. They must be financed in cash, in the same way as the deposit.
Sometimes stricter requirements. Some lenders ask for more for profiles seen as riskier: self-employed people, variable incomes, unusual properties or high-end properties whose resale is less liquid.
Detailed example
For a property priced at CHF 1’000’000:
| Item | Amount |
|---|---|
| Total equity (20%) | CHF 200’000 |
| of which mandatory hard equity | CHF 100’000 minimum |
| of which 2nd pillar possible | CHF 100’000 maximum |
| Mortgage | CHF 800’000 |
| Acquisition costs | to be budgeted on top |
Affordability, the other condition for access
A sufficient deposit guarantees nothing. Affordability checks that the household can sustain the housing costs over time, including if rates rise.
The calculation adds up three items:
- Mortgage interest at the notional rate of 5%, far above the current market, to simulate a scenario of rising rates.
- Amortisation of the second rank, spread over fifteen years.
- Maintenance costs, estimated as a flat rate of about 1% of the property’s value per year.
The total must not exceed about one third of the household’s gross annual income.
Worked example
A couple with a gross annual income of CHF 200’000 is aiming for a property priced at CHF 1’300’000.
| Scenario | Equity | Mortgage | Notional costs | Ratio |
|---|---|---|---|---|
| 20% deposit | CHF 260’000 | CHF 1’040’000 | about CHF 76’500 | about 38% |
| 30% deposit | CHF 390’000 | CHF 910’000 | about CHF 61’500 | about 31% |
With a 20% deposit, the application is refused despite a comfortable income. With 30%, it goes through. The gap comes mainly from amortisation: at an 80% loan-to-value ratio, the second rank represents more than CHF 170’000 to repay over fifteen years, against about CHF 43’000 at 30%.
The practical lesson is simple: simulate your affordability before you start viewing properties, not after you have found one.
Personal savings, the foundation of the application
Savings held in an account remain the most readable form of equity for a bank. There are no withdrawal restrictions and no consequences for your pension.
Traceability matters as much as the amount. The bank asks for statements covering several months to verify the origin of the funds. A history of regular deposits strengthens the application; a sudden, undocumented inflow of cash weakens it.
Keep a reserve after the purchase. Three to six months of living expenses is a reasonable minimum to absorb unforeseen works, higher charges or a temporary drop in income. Emptying your savings to maximise the deposit is a false economy.
Beware of volatile investments. If the purchase is planned within one to two years, the amounts earmarked for the deposit should stay in stable, liquid instruments. A market correction at the wrong moment can derail a transaction already under way.
Drawing on your 2nd and 3rd pillars
Encouragement of home ownership allows pension assets to be used to buy a home for your own use. Our guide explains how pillar 3a works for a property purchase; here is the essential for both pillars.
The 2nd pillar
Early withdrawal is reserved for owner-occupied housing. It finances the purchase, construction or renovation, with a minimum amount generally set at CHF 20’000.
Pledging is the alternative: the capital stays in the pension fund and serves as security for the bank, which avoids immediate taxation.
Three consequences to weigh. A withdrawal reduces retirement benefits and may reduce death and disability cover. The amount withdrawn is taxed separately, at rates that vary by canton. Finally, restrictions apply after age 50, and the written consent of the spouse or registered partner is mandatory.
Pillar 3a
The third pillar can be withdrawn or pledged on the same basis, but with a decisive advantage: it counts as hard equity.
That is what makes it the most effective tool for reaching the 10% threshold outside the 2nd pillar, and first-time buyers frequently use it to top up their deposit. A household with a substantial 2nd pillar but little free savings will often solve its problem this way.
Withdrawals are taxed separately from ordinary income, with rates that vary widely from one canton to another.
Other sources of equity
Securities. Shares, bonds and investment funds can be sold or pledged through a Lombard loan. Pledging avoids realising the capital gain, but the bank applies a haircut to the portfolio’s value and the loan’s interest weighs on the affordability calculation.
Family gifts. They are accepted as a deposit by most lenders and can cover all or part of the equity. Their tax treatment depends on the canton and the degree of kinship: several cantons, including Geneva, exempt gifts in the direct line from gift tax.
Advance on inheritance. It works like a gift, but is set against the future inheritance share. The statutory shares of the other heirs must be respected, and the deed must be formalised in writing for the bank to accept it.
Private loan. A family loan can be accepted as equity, generally provided it is interest-free and comes with a subordination clause, which suspends repayment for as long as the mortgage runs.
Less common sources. Redeemable life insurance, pledging of valuables, increasing the mortgage on a relative’s property. Each lender applies its own rules of acceptance and valuation.
Requirements by type of property
| Type of property | Equity | 2nd pillar |
|---|---|---|
| Main residence | 20%, of which 10% hard | Accepted |
| Second home | about 40% | Excluded |
| High-end property | 40% or more depending on the bank | Accepted if for own use |
| Investment building | at least 25% depending on the lender | Excluded |
The second home is the most demanding category, apartment or house alike: the whole deposit must come from hard equity, since occupational pension is reserved for owner-occupied housing.
High-end properties are valued conservatively, because the resale market is narrower. The gap between asking price and lending value is more common there than elsewhere.
Investment buildings can be financed up to 75% of their value and are analysed on other criteria: net rental cash flow, vacancy rate, stability of income. Our guide to Swiss property yield sets out these calculations.
Mixed-use properties, partly owner-occupied and partly let, combine the two regimes in proportion to floor area.
How to increase your equity
For a household that has not yet built up its deposit, here are the realistic levers over a horizon of three to ten years.
A dedicated savings plan. Regular monthly payments into a dedicated account or a pillar 3a build the capital gradually. Pillar 3a adds an immediate tax advantage, since contributions are deductible from taxable income within the annual limits.
Reducing consumer debt. A car lease or an outstanding loan weighs directly on the affordability calculated by the bank. Paying them off before submitting an application improves your profile more effectively than an equivalent amount of extra savings.
Planning for family help. A gift or advance on inheritance takes time: discussion beforehand, written formalisation, checking of statutory shares. It is better to start a year before the project than three weeks before signing.
For current owners, selling the existing property frees up new equity, provided property gains tax is included in the calculation. In Geneva, its amount depends on how long you have owned the property, under a declining scale, set out in our guide to property gains.
Finding the right balance between deposit and mortgage
A maximum deposit is not always the best strategy. The trade-off depends on each person’s wealth and tax situation.
What a deposit above 20% brings. Less interest, better affordability, more bargaining power on the rate, and reduced or eliminated mandatory amortisation.
What a deposit that is too high costs. Mortgage interest is deductible from taxable income, and the rental value is added to that income. Controlled borrowing therefore keeps a real tax benefit, which varies with the household’s marginal tax rate.
The choice of mortgage model. A fixed-rate mortgage offers a constant rate over the whole term, which secures the budget at the price of a premium compared with indexed products.
Caution with pension assets. Heavy use of the 2nd pillar weakens retirement. This withdrawal must fit within overall planning, including the possibility of rebuilding the assets withdrawn.
Mandatory amortisation. When the mortgage exceeds two thirds of the lending value, the excess portion, known as the second mortgage, must be amortised within a period generally set at fifteen years. This point deserves particular attention from age 45 or 50, to avoid carrying this burden into retirement. Our fact sheet on mortgage amortisation details the choice between direct and indirect amortisation.
Comparing several structures. Simulate 20%, 25% and 30% deposits with an adviser to measure the concrete effect on monthly payments, taxation and long-term security. The gap is rarely what you imagine.
The steps to prepare your financing
- Take stock of your situation. Stable income, existing debts, available savings, pension assets. From these, work out the maximum budget compatible with the one-third rule, and the equity needed for the type of property you are targeting.
- List all sources of equity. Savings account, liquid securities, pension fund, pillar 3a, a possible gift, redeemable life insurance. Note the amounts and check how readily available they really are.
- Request your pension statements. The pension fund and the 3a institution state the amounts that can be drawn and any restrictions linked to age or frequency of withdrawals.
- Contact several lenders. One or two banks, or a mortgage broker, to obtain an affordability analysis and ideally a financing certificate. It strengthens your position with the seller, particularly on a first purchase.
- Budget for ancillary costs. Notary, registration duties, immediate works, furnishing, removal. Allow a margin for the unexpected.
- Settle the final structure. The exact split between hard equity, pension, first and second rank, with the tax consequences checked, before signing a purchase offer or a promise to sell.
Points to watch
Test the robustness of the project. A sharp rise in rates, a fall in income, a separation: a sound financing plan absorbs these scenarios without putting the household in difficulty. Redo the calculation under these assumptions before signing.
Do not skimp on the deposit. Financing at the bare minimum reduces your safety margin and, when it relies mainly on the 2nd pillar, weakens your retirement as much as your present.
Document every franc. The bank demands full traceability of the origin of the funds: account statements, pension statements, formalised gift or advance-on-inheritance contracts. A complete file speeds up processing and reduces the risk of refusal.
Review the plan every three to five years. Mortgage structure, amortisation pace, pension strategy: these parameters change with your situation, particularly as retirement approaches.
Conclusion
The dream of owning a home in Switzerland rests on two cumulative conditions: a deposit of at least 20%, half of it in hard equity, and an affordability level that keeps notional costs below one third of gross income. The second is the one that blocks the most applications, including among households with comfortable incomes.
Preparation makes the difference. Listing your sources of equity, obtaining your pension statements, paying off consumer credit and simulating several financing structures before viewing properties lets you approach a purchase with real room for manoeuvre rather than by brute force.
