Mortgage: explanation, legal basis and tips
ResourcesguideConstruction and Real Estate LawMortgage: explanation, legal basis and tips
Construction and Real Estate Law 
9 min. Lesedauer
04. September 2025Owning your own home is the dream of many people and also has many financial benefits. However, raising the money to purchase a property isn’t easy. Therefore, a mortgage is often taken out when purchasing a home. This type of loan offers the financial institution the opportunity to cash in through the sale of the property in the event of a default. In this article, you’ll learn what a mortgage loan is, the criteria for one, and the various interest rates.
What is a mortgage loan?
For the majority of buyers, it is difficult to finance the purchase of a property entirely with their own resources. These usually consist of only a deposit, while the rest of the capital is financed through loans. One of the possible loan types for real estate purchases is the mortgage loan, commonly referred to as a mortgage. This is a long-term loan that can only be used to finance the purchase of a property, a rental investment, or a construction project.
With this type of loan, the property itself is used as collateral by the lending financial institution to cover any default (Article 816 of the Swiss Civil Code). In concrete terms, the property is then considered a prerogative on the property or a “pledge as security.” In return, the borrower receives a loan that allows them to purchase or build.
The mortgage certificate serves as collateral to secure the loan. Since January 1, 2012, it has existed in two forms. First, there is the traditional paper mortgage certificate, which is a written document that certifies the claim and the priority granted to the financial institution. This must be recorded in a notarized deed (Article 799 of the Civil Code). There is also the registered mortgage certificate. This must be entered in the land register and be in the name of the creditor or owner (Article 857 of the Civil Code).
What does a mortgage loan consist of?
A mortgage loan consists of several components. It typically begins with a minimum of 20% equity, which is required by financial institutions to grant the loan. Of this 20%, at least 10% must come from savings other than the second pillar (occupational pension), i.e., directly from your personal savings.
The loan is then divided into two further parts: the first-ranking and second-ranking debts. The first-ranking mortgage covers 65% of the property’s value, while the second-ranking mortgage covers the remaining 15%. The repayment term for the second-ranking loan is shorter than that for the first-ranking loan. This 15% must be repaid within a maximum of 15 years and by age 65 (in any case, before retirement). The interest rates associated with the second-ranking mortgage, on the other hand, are generally higher than those for the first-ranking mortgage. Please note that depending on your equity and collateral, it may sometimes be possible to obtain only a first-lien mortgage.
How much does a mortgage cost?
A mortgage loan inevitably involves costs. In addition to the interest repayment, various costs are incurred at the time of taking out the loan: notary fees, fees for registration in the land registry, and potential transfer taxes. Furthermore, a mortgage loan also incurs maintenance costs. These costs typically amount to between 3% and 5% of the value of the mortgaged property, depending on the canton.
It is important to note that in Switzerland, only the second-tier loan must be repaid, not the entire loan, as is the case in countries like France. It is possible to repay the loan directly or indirectly. With direct repayment, repayment is made regularly through bank transfers to the financial institution. The loan amount thus gradually decreases, and so does the interest. However, as the loan amount decreases, the borrower cannot claim the same tax deductions and may therefore have to pay higher taxes.
If repayment is made indirectly, the debt is repaid into an individual pension account (pillar 3) or a life insurance policy. This keeps the amount of the debt the same, and consequently, the tax deductions remain the same.
The Different Mortgage Interest Rates
In Switzerland, there are three types of mortgages that can be used to finance the purchase of a property: the fixed-rate mortgage, the adjustable-rate mortgage, and the SARON mortgage (which replaces the LIBOR mortgage). These different types of mortgages all have their advantages and disadvantages, and choosing one depends on your personal situation.
The fixed-rate mortgage is one of the most common types of mortgages because the interest rates are relatively low. With this type of mortgage, the borrower and the financial institution jointly agree on the loan amount and the interest rate that will apply over the entire term. The interest rate thus remains the same for the entire term of the loan, regardless of market interest rates. Typically, this type of mortgage is concluded for a term of 2 to 15 years, in rare cases even up to 20 years, and for a minimum amount of CHF 100,000.
The adjustable-rate mortgage is another type of mortgage chosen for its flexibility. In this case, the interest rate fluctuates according to market interest rates. Unlike a fixed-rate mortgage, there is no fixed repayment term. There is also no minimum amount. While taking out this type of mortgage has its advantages, it is also risky, as financial institutions can change their interest rates at any time and without justification.
Finally, the last existing type of mortgage is the SARON mortgage. With this type of loan, the interest rate is calculated for a specific term, usually between one and six years, and for a minimum amount of CHF 100. The SARON mortgage has a variable interest rate that is set at regular intervals. This means that the interest rate is revalued regularly, quarterly or semi-annually. With the SARON mortgage, your payments adjust to interest rates, allowing you to save money when interest rates fall. On the other hand, you can switch to a fixed-rate mortgage if necessary. The disadvantage of the SARON mortgage is that you must constantly monitor money market fluctuations to avoid missing out on interest rate increases, otherwise you’ll end up overspending on your mortgage.
How do you take out a mortgage loan?
A mortgage loan can be obtained from a financial institution, such as a bank, an insurance company, or a pension fund. Banks are generally the most popular providers for this type of loan, although insurance companies often offer the best interest rates. Since each bank offers its own interest rates, it’s advisable to seek professional advice.
To obtain a mortgage loan, the financial institution will consider the value of the property, the borrower’s income, and the equity contributed. To obtain the loan, you must also meet two key criteria: the loan-to-value ratio and the debt-to-income ratio.
The loan-to-value ratio is the ratio between the borrowed amount and the market value of the property. This ratio cannot exceed 80%, meaning 20% of the value must come from equity. The second key criterion for obtaining a home loan is the debt-to-income ratio, which cannot exceed one-third of your gross income. This is the ratio between the costs associated with the property (repayment, interest, work, etc.) and the borrower’s income. This ratio may not exceed 33%. In some cases, this ratio can be increased to 40%.
This is how legal advice works today – simple, secure, transparent
You can find the right lawyer here for free without any time-consuming research.
- Submit a request
- Compare offers
- Start cooperation
- Compare costs
FAQ: The mortgage loan
The amount of the mortgage depends on the value of the property being mortgaged. However, the loan may not exceed 80% of the purchase price of the property. 20% of the amount must come from your own funds.
A mortgage loan is subject to costs from the moment it is signed. These include notary fees, interest, land registry registration fees, maintenance costs, and transfer taxes.
The term of a mortgage loan depends on the type of loan chosen. It can be taken out for a specific period. If not, the loan typically has a term of 1 to 15 years, or a maximum of 20 years.
Financial institutions examine the borrower’s personal situation to determine whether they are eligible for a loan. The individual must meet two criteria: the loan-to-value ratio and the debt-to-income ratio.
There are three types of mortgage loans in Switzerland: the fixed-rate mortgage, the adjustable-rate mortgage, and the SARON mortgage. Each of these loans has different interest rates and terms.
The choice of mortgage interest rate depends on the borrower’s situation and interest rate trends. It is advisable to seek expert advice when choosing a loan.
There are two types of mortgage certificates: the paper mortgage certificate, which consists of a written document, and the registered mortgage certificate, which is subject to an entry in the land register (Article 842 of the Civil Code).
