Glossary

Loan-to-value ratio

The ratio between the mortgage amount and the lending value used by the bank, expressed as a percentage. For an owner-occupied home, Swiss lenders generally finance up to 80% of this value, with the balance coming from equity. The loan-to-value ratio determines how the financing is structured: the portion up to two thirds of the value forms the first mortgage, while the portion above this threshold forms the second mortgage, which must be amortised. It also affects the terms offered, as a higher loan-to-value ratio generally comes with a larger bank margin. It should not be confused with the ratio to the purchase price: when the bank uses a value lower than the agreed price, the difference must be financed entirely from equity.