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PROPERTY

EXPLAINED: How to save on your mortgage in Switzerland

Buying a home will be one of the biggest financial commitments any of us face. Here's how to save on a mortgage in Switzerland.

Published: 15 February 2022 16:03 CET
Taking out a mortgage in Switzerland? Here's how you can save. Image: Pixabay
Taking out a mortgage in Switzerland? Here's how you can save. Image: Pixabay

As the only country in Europe where more than 50 percent of people rent their home, Switzerland has the lowest home ownership rate on the continent. 

This is due to a variety of factors, including strong tenancy laws, culture, cost and a scarcity of land. 

There are some however who are keen to buy their own home – and evidence suggests this number is growing. 

READ MORE: Why do so many Swiss prefer to rent rather than buy their own home?

While having enough cash is an important starting point, there are also a range of other factors to be taken into consideration. 

Here are some tips for mortgages in Switzerland. 

Give yourself time – more time than you think you need

Buying a home will be one of the most important and consequential decisions you ever make, so give yourself plenty of time beforehand. 

Speak to other people who have bought homes recently and several years ago. 

Get to know the relevant terminology for your part of Switzerland so that you know what you are talking about. 

For instance, what was a LIBOR mortgage – and what is a SARON mortgage – and how has the latter replaced the former?

A low interest rate is great, but can you pay the mortgage off early. If not, you may end up costing yourself a whole lot more. 

Is the interest rate fixed or variable? And if it is variable, what happens when rates rise?

Below are just some general tips to consider, but remember that you can never investigate too much. 

Check out the following link for more specifics on the costs of buying a home in Switzerland. 

EXPLAINED: The hidden costs of buying a home in Switzerland

Is taking out a mortgage to buy a home in Switzerland a good decision?

Interest rate rises haven’t quelled rising demand for properties, nor has the impact of the pandemic.

Speaking with Swiss news organisation Tamedia, property expert Patrick Schnorf said demand is set to continue.

“We assume that due to immigration, high birth rates and household divisions, demand will remain the same in the near future,” Schnorf said.

“People have saved a lot (during the Covid pandemic), many have a secure income, these are the driving factors,”

In fact, the Covid pandemic has not dampened demand, but has channeled it towards a different type of property.

Larger properties with more rooms and gardens have seen greater demand as a consequence of lockdowns and working from home requirements

“The radius of the real estate search has therefore also extended to the surrounding rural regions,” explained Schnorf.

READ MORE: What does the coronavirus mean for Switzerland’s property market?

While lockdowns look to be over and the working from home rules have come to an end, experts argue that some of these changes are more than mere trends and are likely to be permanent.

What types of mortgages are there in Switzerland? 

There is a relatively wide array of mortgages on offer in Switzerland, but here are some of the main ones. 

Not unique to Switzerland is the fixed-rate mortgage, where you pay an agreed rate on your mortgage over a set period of time. This is the case regardless of interest rate trends. 

Also not unique to Switzerland is the variable mortgage, where rates are subject to market fluctuations. 

Comparatively unique to Switzerland is the SARON (Swiss Average Rate Overnight) mortgage. 

The SARON mortgage replaced the LIBOR mortgage (London Interbank Offered Rate) at the start of 2022. 

The interest rates for SARON mortgages are variable and are calculated on the basis of the SARON reference rate. 

The SARON reference rate takes into account actual transactions in the Swiss money market (unlike the LIBOR rate which was calculated on the basis of recommendations from a handful of banks) and is therefore believed to be more transparent. 

Know and understand Swiss deposit rules

Before you even begin thinking about buying a home, you need to know that higher deposits are required in Switzerland than many other countries. 

The minimum deposit in Switzerland is around a fifth (20 percent) of the total purchase cost. 

This is much higher than the five percent often seen in English-speaking countries, but it’s much lower than the 40 percent sometimes required in Germany. 

While you might have just felt your home ownership dreams disappear with a whoosh, only half of that 20 percent figure should come in cash. 

The other half can come out of equity. 

It can also come out of your pension fund – although if you’ve only recently arrived in Switzerland, you might not have that much cash stashed in there. 

READ MORE: Can foreigners buy property in Switzerland?

Switzerland has low interest rates – but be aware of fluctuations 

Swiss interest rates have been low for years, creating an ideal situation for anyone wanting to borrow money to get onto the property ladder. 

But just because something has been a certain way for a while doesn’t mean it will stay that way – and even a quarter of a percent increase in interest rates can have significant impacts on the average mortgage. 

Inflation has already hit highs in Switzerland – and more appears to be on the way. 

READ MORE: How to protect your savings against inflation in Switzerland

In January 2022, several financial institutions announced that mortgage rates were on the rise due to a likely rate increase from Switzerland’s National Bank. 

That said, interest rate hikes are not necessarily permanent – but be sure to incorporate scope for rate fluctuations into your budget. 

Don’t just stick to banks

It might sound counter intuitive, but avoiding banks might help you save on a mortgage. 

Insurers often have competitive rates for mortgages that beat out what the banks have to offer. 

Generally speaking insurance companies offer fixed term mortgages and interest rates are lower than those offered by the banks, although you may need to commit to a longer term. 

To sweeten the deal, insurers will often throw in discounts on other insurances, i.e. life insurance or home and contents. 

They will not allow you to use your pension funds as equity, which means you’ll need more cash for a deposit. 

Insurance companies also have a range of other rules related to amortisation, loan to value ratios, etc, which are more strictly enforced – so getting a mortgage with an insurer can be more difficult. 

Some insurance companies offering mortgages in Switzerland include Allianz Suisse, Axa, Baloise Bank SoBa, Generali, Helvetia, Swiss Life and Zurich.

Go online

Another cheaper option in Switzerland when it comes to mortgages is to go online, either through an online-only mortgage from a bricks and mortar bank or an online-only financial institution. 

So-called ‘neo banks’ have sprung up in recent years, which offer the services of regular banks but do not have any branches or locations. 

All account management is done online, which allows them to save money, while the costs of rent and locations are also spared. 

EXPLAINED: Which banks are best for foreigners in Switzerland?

Swiss financial agency Moneyland notes that those who opt for online mortgages tend to be savvy and more aware of their rights than others, which is at least in part because these mortgages tend to include less frequent consultation (thereby saving on staff costs). 

Online mortgages will usually be offered by larger banks or financial institutions through associate or other companies. 

While the source of the funds might be the same – i.e. an online bank connected to a bricks and mortar bank both offering mortgages – they will often use a different name so as to not cannibalise on their main offerings. 

Some online mortgage options include eHypothek, Homegate, Hypomat, Migros Bank and several cantonal banks. 

Please keep in mind that this was written as a guide only and should not take the place of qualified financial advice. 

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MONEY

What you can be fined for in Switzerland if you don’t follow everyday rules

If you are a new arrival in Switzerland, or even if you have been living here for a while but are not familiar with local laws, these are the rules you need to follow to avoid being slapped with a fine.

Published: 12 June 2024 12:13 CEST
What you can be fined for in Switzerland if you don't follow everyday rules

Switzerland has numerous rules and regulations in place for a variety of infractions.

The good news (if you can call it that) is that you can be fined only for not complying with official laws. If you break one of many unwritten rules, you may get hostile looks and comments, but no legal repercussions.

Some of the offences are obvious — not speeding or being drunk while driving; not causing a disturbance in public; and not instigating or participating in criminal activities, among other infractions — everything that you shouldn’t do anywhere, not just in Switzerland.

Others, on the other hand, like the ones mentioned below, are more related to Switzerland’s own, and often quirkily unique, regulations.

These are some of the rules you may inadvertently break and the fines that could be handed to you for non-compliance.

Not registering your address at your commune

When you rent an apartment or buy a property in Switzerland, you will have to announce your arrival at your local municipality. 

The ‘address registration’ rules may come as somewhat of a shock to people from some other places, like the United States, where you can move from one location to another and stay pretty much under the radar.

Not so in Switzerland because Swiss authorities want to know who is living in their country and where.

When you settle in a new home, you have 14 days to announce your arrival in your new commune of residence, though in some places the deadline may be longer.

This is how to go about this process.

(The entire process will have to be repeated when you move to another home, even if you remain in the same commune. You will have to de-register your old address and register the new one.)

What happens if you don’t do this?

Local authorities will find you anyway sooner or later — probably sooner — and impose a hefty fine on you, the amount of which will depend on the reason why you didn’t register in the first place.

Not having a health insurance

Health insurance is compulsory in Switzerland for all legal permanent residents.

Anyone who moves here must get health coverage within three months of their arrival. 

If you fail to do so, your local authority will choose a plan on your behalf and you will have to pay the premiums.

If you don’t (and have no valid reason for being exempted from this obligation), two things will happen.

Firstly, you could be denied medical care other than in case of emergencies.

Secondly, your unpaid bills will add up, and you could be subject to debt proceedings. This, in turn, could be held against you if you ever decide to apply for naturalisation.

READ ALSO: Could personal debt stop you from becoming Swiss? 

Driving without a vignette

If you use Swiss motorways, even if it’s only for a short stretch, you must purchase a 40-franc sticker to affix to the inside of your window shield.

Unlike many other countries, Switzerland has no tolls on their highways, so the vignette compensates for the cost of maintaining the roads.

Vignettes are valid for one year, from January 1st to December 31st, and can be purchased at petrol stations, post offices or online.

If you drive on the motorway without a vignette or if it is not stuck on correctly, you risk getting a 200-franc fine.

READ ALSO: What you need to know about Switzerland’s motorway charge sticker

Trash disposal and recycling

In nearly all Swiss towns and villages, trash must be segregated and placed in special bags or in bags that have a special sticker on them, and placed in a designated collection point on assigned days.

Not segregating your trash — for instance, throwing out PET bottles with tin cans or paper, or not putting it out on correct days — can result in heavy fines, the amount of which is determined by each individual commune.

Municipal workers have the right to go through trash bags to identify garbage offenders — and they do.

Just to give you an idea of the amount you could be expected to pay, a woman in the Lausanne area was fined 190 francs after she allegedly put out her garbage on a Wednesday, rather than on Monday, which was a designated trash collectin day on her street.

Another offender, a US citizen living in Zurich, threw a carton box with his name and address into a ‘regular’ trash can, instead of recycling it.

At the time of this incident, the offender had not yet received his fine, but it was expected to be as high as 320 francs. 

This article will help you avoid such penalties. 

Being loud on Sunday

Under the law, Sunday is a day of rest in Switzerland, so you should do nothing to disturb your neighbours, either sonorically or visually.

This means no loud noises like lawn mowing, vacuuming, or recycling bottles. Also, you cannot hang your laundry out to dry, as the sight of your undies may be offensive to your neighbours on a Sunday.

This is what  a 35-year-old German woman should have known, but clearly didn’t: she committed a faux-pas of recycling glass on Sunday.

Her reaction after being slapped with a 250-franc fine: “I can understand that people don’t want to be disturbed, but going to the police over a few bottles seems a bit much”.

Not in Switzerland, apparently.

If someone complains and, even worse, reports you to police, you can expect a warning at best (if this is your first offence), or monetary penalties which depend on the noise ordinance in your community.

Just as an example, fines for excessive noise in Geneva could be as high 150 francs.

READ ALSO: Six things you shouldn’t do on a Sunday in Switzerland 

Buying your train ticket too late

If you purchase your ticket on your Swiss railway app just as the train is pulling out of the station, you commit an offence. 

This may be taking the notion of punctuality to new heights, but one of Swiss trains’ (SBB’s) regulations states that a ticket is not valid if it is purchased after the departure of the train, even if by a split second.

Anyone who does this, for whatever reason, is considered a fare dodger.

If you do this, you could be slapped with a 90-franc fine which, depending on the distance you are travelling, may be much more than you actually paid for your ticket.

That is the amount for first-time offenders.

For the second and subsequent infractions, the fine increases to 130 and 160 francs, respectively.

But that’s not all,: you could also be fined for putting your luggage on an empty seat of a crowded train, thus preventing another passenger from sitting down.

“The general rule is that one person only can occupy one seat,” said SBB spokesperson Jeannine Egi.

In theory, passengers can be asked to buy a ticket for their luggage. However,  this measure is rarely used in practice.”

“The train staff can enforce the ‘house rules’ on trains using their own judgement,” Egi said.

READ ALSO: Why putting your luggage on the seat on a Swiss train could cost you 

These are just some of the rules you may accidentally break while in Switzerland.

But there are others as well:

READ ALSO: Six ways you can be fined in Switzerland 

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