Currency risks with foreign income: Financing for international professionals

What does a currency risk mean in financing?

A currency risk arises when the currency of your income loses value against the Swiss franc. Since the mortgage debt and interest payments are fixed in francs, if your home currency depreciates, you would have to spend more units of that currency to cover the same monthly costs in Switzerland. Banks already take this risk into account in the credit approval process by often applying safety discounts to foreign currency income.

Opportunities and risks of the foreign currency constellation

Financing with foreign income offers flexibility for global careers, but presents calculation hurdles.

• Opportunities: A strong income in a stable world currency can form the basis for solid financing in Switzerland. International professionals often have the necessary equity to meet the high requirements of the Swiss market.
• Risks: The main risk is the volatility of exchange rates. If the value of your income currency falls significantly compared to the franc, the affordability of the mortgage may be at risk. In addition, Swiss banks often require a higher equity ratio or apply stricter affordability calculations for income in foreign currencies, in order to cushion exchange rate fluctuations.

Financing and tax considerations

When it comes to financing, the bank's calculation basis plays a decisive role. The current exchange rate is usually not used for affordability calculations but rather a conservative average rate including a safety margin of 10% to 20%. This ensures that you can still service your mortgage even if the exchange rate moves against you.

Tax-wise, the situation remains complex: While the property is taxed in Switzerland, worldwide income must be declared depending on the double taxation agreement. The deductibility of mortgage interest in the Swiss tax return is an important lever to reduce the effective tax burden, regardless of the original currency in which the salary was paid.

Is buying worthwhile despite currency risk?

Buying property in Switzerland can make sense despite currency risks, as it represents a natural hedge: You invest in a tangible asset in Swiss francs, one of the most stable currencies in the world. In the long run, the value stability of Swiss property often offsets the risk of short-term currency fluctuations. Nevertheless, international professionals should have sufficient liquidity reserves in francs to bridge periods of extreme exchange rate volatility without stress.

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