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Mortgage market in Switzerland

In the past, banks made their main business with investment projects of the companies, for example by financing the purchase of production machines. Since the 1970s, however, the mortgage business has grown enormously and has become an important and necessary means for financial institutions and citizens. Even in rich Switzerland, the purchase of real estate, a home, whether a house or a freehold or vacation apartment, is hardly possible for anyone without external financing. This external financing is provided in the form of a mortgage by mortgage providers such as banks, but now also by insurance companies and pension funds.

What is a mortgage?

For the money provided or the loan for the purchase of real estate, the mortgage provider requires a security from the buyer. This is realized in the form of a pledge on the property in question. A mortgage is therefore nothing more than a security for the bank. In this way the bank receives a security to get its money back. If the buyer defaults on his interest and amortization payments, the bank can make use of this security (lien).

How does a mortgage work?

Once you have found your dream property, get advice from a professional. The main thing here is to work out a financial proposal and determine the key data of the financing conditions. These conditions will become part of the loan agreement which will then be signed between you and the mortgage provider. With the signing, you are then the owner of your dream property. By means of a mortgage, the bank acquires the security for the property. The mortgage provider then transfers the mortgage amount to the seller according to the purchase contract. From this point on, you pay mortgage interest to your mortgage provider and reduce your mortgage through amortization.

Own funds

You must finance at least 20 percent of the property value specified in the financing conditions with your own funds. At least half of this must consist of liquid savings, while the other half can be drawn, for example, from the pension fund (in case of self-use). The remaining 80 percent is covered by the mortgage. Please note: there may be differences between the value of the property and the purchase price according to the purchase contract. In this case the real estate value determined or recognized by the mortgage provider always counts.

The requirements regarding own funds vary depending on the use of the property. If the property is occupied by the owner, capital from the pension fund (2nd and 3rd pillar) can also be pledged in addition to the required 20% of the equity capital.

For vacation homes, more equity capital is required, between 30 and 40 percent of the value of the property. However, the capital from the pension fund cannot be used for this type of property.

For real estate that is to be rented, similar regulations apply as for own use. For commercially used real estate, increased equity rules apply, since the mortgage provider only finances up to 50 percent of the value of the property.


The loan-to-value ratio shows nothing else than the capital situation: what percentage of the purchase price was paid by the mortgage provider and how much by you as the buyer. As already mentioned above, in the case of properties that are occupied by yourself, the mortgage provider pays up to 80 percent of the property value. Example: The real estate value is CHF 500,000. For the sake of simplicity, we equate the real estate value with the purchase price in this example. Your own capital contribution is CHF 100,000, while the remaining CHF 400,000 is transferred by the bank to the seller. As a security, the bank will now lend your real estate with a corresponding mortgage in the amount of CHF 400’000.

Mortgage models

The most common mortgage models are fixed and variable mortgages.

With fixed mortgages, the interest rate is fixed for a certain term, for example for five or ten years. This model is suitable for risk-averse borrowers or in times when interest rates are expected to rise. Disadvantages with fixed mortgages can arise above all when the market interest rate falls. Then you are stuck with expensive financing. Even in the case of premature dissolution, high costs, often in the five-digit range, can arise.

Variable mortgages are not necessarily tied to specific terms. They can be dissolved unilaterally or by mutual agreement and usually without disadvantages. The model allows for great flexibility, but also involves major risks in the event of market instability.


With the purchase of the property not everything locked. The so-called annual expenses apply to take into account. They consist of interest and amortization payments, and maintenance and ancillary costs together and may not exceed 1/3 of annual income.

The affordability is calculated by dividing the annual expenses by the household income. The result shows the amount of the burden on the annual income. This value must not be higher than 33 percent.

Example: Total annual expenditure of the property CHF 30’000 / Annual household income CHF 150’000 results in a wearability value of the property of 20 percent. Conclusion: the annual income is burdened by 20 percent by the annual expenses, thus the long-term affordability of the property is given.

Buying a car: leasing or car loan?

One thing is clear; if the necessary money for the new car has been saved, the cheapest option is to buy a car. You pay no interest and you own the car from the beginning. When buying a car, however, we are always faced with the question of whether car credit or leasing is more advantageous. Although car leasing is still very popular in Switzerland. However, a car loan offers more advantages and is in many cases also cheaper.

What is leasing?

Lessees commit themselves to pay the prescribed leasing installments for the use of the car. In return, they are given the option to buy the car at a certain price at the end of the contract. In other words, leasing is a kind of rent with an option to buy. During the contract period, the car is owned by the lessor, while the lessee may use it under certain conditions (number of kilometers, fully comprehensive insurance coverage, etc.). If you want to exercise this purchase option, you have to pay a high residual value before you own the car. If you do not wish to keep the car, lessees will charge you for any complaints about the vehicle or for the additional kilometers driven.

Leasing is nevertheless a popular method of financing a car purchase in Switzerland. At the end of 2019, the leasing volume was over 9.3 billion Swiss francs with over 648,000 leased vehicles (source: ZEK).

What is a car loan?

Personal loans to individuals that do not serve a professional or commercial purpose generally include cash loans, overdrafts, loans and certain forms of leasing, such as car loans. Private loans are also widely known in Switzerland under the term “consumer loans”. The use of such loans is not restricted to a specific purpose. Such consumer loans are particularly popular as car loans.

According to ZEK, the credit volume of private households in Switzerland in 2019 amounted to around 8.1 billion Swiss francs with just under 372,000 borrowers. This means that every 12th Swiss citizen in 2019 had a personal loan (measured by the working population).

Car loan or leasing: Which is better?

Car buyers are often faced with the decision “buy or lease” and “car loan or leasing”. A cost comparison in advance; 0% is not necessarily free of charge.

Comparison car loan vs. leasing calculation example
Leasing 4.9% Car loan 7.9%
Purchase price 30’000 30’000
Residual value 10’000
Financing amount 20’000 30’000
Interest rate 4.90% 7.90%
Term 48 48
Monthly rate 497.55 727.15
Total costs 23’882 34’903
Total costs after takeover of the vehicle (incl. residual value) 33’882 34’903
Difference 1’021
Less insurance savings* 800
Less tax-deductible interest** 490
Savings car loan compared to leasing 270

*According to a comparison, the fully comprehensive insurance for leasing is about 200 francs more expensive per year. **Assumption tax rate 10%.

Although the leasing interest rate is lower, the bottom line is that you drive cheaper with a car loan. Here is a small overview with the respective advantages and disadvantages.

Comparison car loan vs. leasing overview
Car loan Leasing
For new cars and vehicles as good as new Yes Yes
For second-hand cars Yes Often not possible
Possession Customer is in possession of the car from the beginning Bank. Only after payment of the residual value the property is transferred to the customer
Mileage limit No Yes, according to the contract.
Insurance cover Freely selectable Fully comprehensive insurance is mandatory
Interest and taxes Interest on loans can be deducted from taxes Leasing interest cannot be deducted from taxes
Premature termination Early repayment (without cost consequences) and sale of the car possible at any time. Premature termination of the lease only involves high costs.

Why then still leasing?

If you are not interested in owning a car and always want to drive the latest model, leasing is a good choice.

However, the bottom line is that with a car loan you often drive more cheaply and flexibly.

So what is better when buying a car? Car loan or leasing?

The big difference lies in the question of ownership. With a car loan, the customer is the owner of the car, but not with leasing. Added to this is the residual value at the end of the leasing contract. Here, lessors can often charge for complaints. Leasing is often also associated with conditions. For example, only a certain number of kilometers may be driven during the term of the lease. In addition, there is the obligation of a comprehensive insurance. It is known to be more expensive than partial coverage insurance. The advantages of car loans therefore outweigh those of car leasing in the vast majority of cases.

Credit comparison Switzerland: compare personal loans

The market for personal loans in Switzerland is growing steadily. Statistics from the Central Office for Credit Information (ZEK) show that the volume is increasing from year to year. According to ZEK, the credit volume of private households in Switzerland amounted to around 8.1 billion Swiss francs in 2019. This is an increase of over 5 percent compared to the previous year. The average loan amount for new cash loans was just under 34,000 Swiss francs and the average term was 54 months.

In addition to Cembra Money Bank, Bank-now and Migrosbank are among the market leaders in the private credit sector. However, the recognizable growth is attracting other providers to the market. New providers are Lend, Creditgate24, Cashare, some of which are struggling with difficult access to investors and customers. Also new on the Swiss market is FINROX, a Fintech company specializing in credit and financial services and managed by experienced and dynamic experts from the financial industry. FINROX offers a novel, transparent and independent credit comparison in Switzerland. This enables the borrower to quickly access the optimal loan.

What is a personal loan?

Personal loans to individuals, which do not serve any professional or commercial purpose, usually include cash loans, overdrafts, loans and certain forms of leasing, such as car loans. In Switzerland, the term “personal loan” refers to consumer loans. They are subject to the Consumer Credit Act (KKG) up to an amount of CHF 80,000. The maximum permissible annual percentage rate of charge for personal loans is set by the Federal Council. At present, this is a maximum of 10 percent for cash loans and 12 percent for credit cards. Within this framework, credit providers set the credit interest rate individually after a creditworthiness check of the customer has been carried out. Within this framework, credit providers seek their competitive advantage, in particular through increased efficiency and, most recently, digitization.

Online search and credit comparison in Switzerland

Borrowers are becoming increasingly digitally affine and are taking advantage of the benefits of online loan comparisons. For example, anyone who needs a car loan to buy a car uses online searches. Thus one finds the suitable credit, the best possible interest rate and the best conditions with few Klicks. Owing to the credit comparison the customers do without the time-consuming search, must not run from bank to bank and receive custom-made results free of charge and fast.

A credit comparison calculator requires only a few basic data, like the desired credit amount and the desired running time, in order to supply meaningful results. By adjusting the values, you can quickly determine different scenarios regarding the term and the loan amount and thus calculate the optimal monthly rate.

How are credit costs calculated?

All credit costs incurred are calculated using the effective annual interest rate. Here is an example: with a loan amount of 10’000 Swiss francs and an interest rate of 7.9% for the 12-month term, the interest costs amount to a total of 417.95 Swiss francs; with a term of 24 months they amount to 813.85 Swiss francs and with 36 months the interest cost amount increases to 1’219.35 Swiss francs for the entire term. The monthly rate remains constant. This means that the longer the term, the higher the interest costs. Therefore a fast repayment is usually advantageous.

Amortization of a consumer loan

The advantages of an online loan

A high doctor’s bill, a major purchase, car purchase or an unexpected event are often reasons for taking out a loan if the necessary money is currently lacking or needs to be saved. When the decision to take out a loan is made, the search for the best financing conditions begins. Online platforms make this possible within seconds. The advantages are manifold: there is maximum transparency, you can get a quick overview, the online credit comparison can be carried out at any time (24/7), communication with the credit provider is quick and easy, commitments are usually made within a day and you save a lot of time and money.