A mortgage is a loan granted by a bank, an insurance company, a providence fund or a private individual to a property purchaser. In return, the latter pledges this same property to their lender. Thus, if the debtor fails to meet their obligations (if they do not pay the interests and if they default on loan repayments), the lender has the right to seize the property pledged and then to put it on the market for sale, in order to get their money back.
Nowadays, few homeowners have the luxury of buying a property without taking out a mortgage. A mortgage loan can easily run into several hundred thousand Swiss francs, and must be gradually paid back. This repayment process, also known as amortisation, is arranged when the mortgage is set up, according to the requirements of the lender (usually a bank, insurance company or pension fund) and following the rules governing the mortgage market. These rules state that the mortgage must be brought down to two thirds (around 67%) of the debt’s collateral value (security provided in exchange for a loan) during the first 15 years by making regular repayments.
Buying a home is many people’s dream, and is also likely to be the biggest purchase of their life. You may be wondering how to fund such a major investment. It may seem a daunting prospect, but where there’s a will, there’s a way! Most people will need to borrow money in order to fulfil their home-owning aspirations, so it helps to learn the basics of mortgage finance in Switzerland.