The loan-to-value ratio, also known as the loan-to-value rate, refers to the ratio of the mortgage to the collateral value of the property. The collateral value is the total value of the property, which the lender uses as the basis for calculating the mortgage.

Find out more about the loan-to-value ratio

The external funding share of the collateral value is called the loan-to-value ratio or loan-to-value rate (in percent). The resulting external funding total is the mortgage (in Swiss francs).

Example of a loan-to-value ratio:

• Collateral value: CHF 800,000
• Loan-to-value rate: 80%
• External funding (80% of CHF 800,000): CHF 640,000
• Equity (20% of CHF 800,000): CHF 160,000

If you want to purchase a house or apartment, you have to be able to provide at least 20 percent of the purchase price from your own equity. You can take out a mortgage for the remaining maximum 80 percent. This is also called the “loan-to-value ratio”. 

To assess whether a customer meets the affordability requirements, financial institutions make the following calculation:

Interest (5% of the mortgage) + amortization + running costs (1% of the fair value) ≤ 1/3 of the gross income

Find out more about affordability

You can use the following sources to finance your home:

• Savings (bank accounts, securities custody accounts, pillar 3b, etc.)
• Retirement assets for owner-occupied property from a pension fund (pillar 2) and a fixed pension plan (pillar 3a)
• Gifts/advances against inheritance, loans

Please note that there is no fixed maximum amount for the equity share.

Find out more about taking out a mortgage

Get some in-person advice from our mortgage experts. We will discuss your personal situation and present you with some financial options.

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The first mortgage, i.e. the loan amount of no more than two thirds of the fair value (also known as market value), can be amortized if the affordability criteria are met but does not have to be. An amortization obligation exists only for the second mortgage. 

Example:

• Purchase price: CHF 750,000
• Equity (20% of CHF 750,000): CHF 150,000 
• Total mortgage (80% of CHF 750,000): CHF 600,000 
• 1st mortgage (67% of CHF 750,000): CHF 502,500 
• 2nd mortgage (13% of CHF 750,000): CHF 97,500 

The second mortgage, i.e. the loan amount of the mortgage that exceeds two thirds of the fair value, needs to be repaid. It can be amortized directly or indirectly:

• “Directly” means making regular payments towards the mortgage, and the mortgage decreases by this amount each time
• “Indirectly” means paying into a retirement solution under pillar 3a, which is used only when this pillar is withdrawn to pay off the mortgage debt