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What to do in Switzerland if you cannot pay your mortgage

Hopefully such a situation will never happen to you, but knowing what the laws and practices are in this regard in Switzerland could put your mind at ease.

What to do in Switzerland if you cannot pay your mortgage
Financial problems may keep property owners from paying their mortgage rates. Image by Dimitris Vetsikas from Pixabay

Most home or apartment owners in Switzerland are relatively wealthy because property prices here are high, especially in or near urban centres like Geneva, Zurich, and Basel, or locations with a high concentration of multinational companies and residents, such as Zug and Lausanne.

READ MORE: Swiss property prices see strongest rise in years

To get a mortgage you must prove high enough income or personal assets, so anyone not seen as able to pay interest rates will not be given a loan.

Still, financial situations can change and a mortgage that was once comfortable becomes unaffordable.

One thing that may alleviate your concerns is that — unlike many other countries — Swiss banks or other lenders don’t expect you to pay off the mortgage in its entirety.

As long as you can pay the interest rates, you are fine.

In fact, not paying off your mortgage is considered to make good financial sense, and the Swiss certainly know a thing or two about astute finances.

This article explains why that is:

EXPLAINED: Why not paying off your mortgage in Switzerland can save you money

So if you find yourself strapped financially, at least you don’t have to worry about paying off your whole mortgage.

You do, however, have to continue to pay the interest rates on the mortgage.

One thing you may be wondering about is whether the bank / mortgage lender can seize your house and whether you will have to move out.

In theory, this is a possibility, according to the so-called promissory note which you signed when you took out your mortgage. In practice, this rarely happens in Switzerland and only as a last resort in extreme situations (as opposed to, say, the United States, where banks routinely foreclose and sell properties for non-payment of mortgage).

Instead, most Swiss mortgage lending institutions will try to help you, at least temporarily,  to find a viable solution, including deferring of payment.

A lot will depend on your standing and previous relationship with the bank — in other words, if you are a longtime client and have some investments or other assets, that could help you buy some time.

Ultimately, however, banks are not in a charity business and they want to make money, rather than lose it. So if your inability to pay interest rates continues, you may eventually have to sell the property and pay off the debt.

One thing to keep in mind before you ask for a mortgage is to take out an insurance policy that will take effect in case you are later unable to pay your interest rates due to a job loss or other factors beyond your control.

You may also want to consider getting debt counseling, available through charitable organisations like Caritas, 

READ MORE: EXPLAINED: How to save on your mortgage in Switzerland
 

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PROPERTY

Rent prices and living space: Where in Switzerland has the best deal?

Under what conditions do foreign residents live in Switzerland? How many people in are owners rather than tenants (and vice-versa?) And where in Switzerland are rents highest and lowest?

Rent prices and living space: Where in Switzerland has the best deal?

These and other housing-related questions are answered in a new survey published by the Federal Statistical Office (FSO) on Monday. 

These are some of its main findings.

Living space is determined by nationality

In each canton, Swiss nationals have more living space at their disposal than their foreign counterparty, the study found.

The national average for a Swiss household of two or more persons is 44.6 sq/m, while for foreign households it is 30.8 sq/m.

Looking at some cantons, in Zurich, that ratio is 43.5 sq/m for Swiss and 30.8 sq/m for foreign residents.

In Geneva, it is 36.2 vs 28.4; in Basel-City 38.8 vs 29; and in Vaud 42.7 vs 30.4.

The highest disparity, however, was found in Thurgau: 50.5 vs 34.3.

READ ALSO: How foreigners in Switzerland have worse living conditions than the Swiss

Owners vs. tenants

It comes as no surprise to anyone who is familiar with Switzerland’s housing market that far more people rent their dwellings than own them.

Just over 1.4 million accommodations (both homes and apartments) are owned by the people who live in them, while 2.4 million are occupied by renters.

The reasons for this trend, which contrasts with the rest of Europe, include the high cost of land and properties, as well as the fact that Switzerland’s tax system favours tenancy over ownership.

READ ALSO: Why do so many in Switzerland rent rather than buy a home?

Highest and lowest rents

The study confirmed that Zug has highest rents in Switzerland — the average cost is 1,850 francs. This fact is party due to the scarcity of available housing plaguing the tiny canton.

READ ALSO: Why does Zug have Switzerland’s ‘most acute’ housing shortage?

Zurich, which has been suffering from housing woes of its own, is in the second place (1,654 francs), followed by Schwyz (1,616).

Rents in five other cantons are also above the Swiss average of 1,412, francs.

They are Geneva (1,504); Nidwalden (1,495); Basel Country (1,468); Vaud (1,416); and Aargau (1,415).

The most affordable rents, on the other hand, are to be found in Jura — a mere 986 francs.

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