Equity for Buying Property: How Much Is Needed?

Minimum Equity Requirements

Anyone looking to buy a property in Switzerland must contribute at least 20% of the purchase price as equity. The remaining 80% can be financed through a mortgage. However, there are important conditions:

• At least 10% of the purchase price must come from personal savings and cannot be withdrawn from a pension fund (2nd pillar).
• The remaining 10% may be financed through a withdrawal from the pension fund.

However, different rules apply to vacation homes and investment properties. You can find an overview here.

The more equity available, the lower the required mortgage will be. This reduces monthly interest costs and can make the financing more stable in the long term. Those with additional equity can not only lower the loan amount but also secure better conditions from the bank.

What Are the Sources of Equity?

In addition to traditional savings, there are several ways to raise the necessary equity:

1. Savings accounts and securities – Personal savings or invested capital
2. 3rd pillar funds – These can be withdrawn or pledged for property purchases. We have summarized the difference in this blog post
3. Pension fund assets (2nd pillar) – Early withdrawal for financing owner-occupied property
4. Advances on inheritance or gifts – Financial support from family members
5. Additional personal contributions – If you are a professional in a construction-related field, you may contribute labor, which can be recognized as equity by the bank.

Impact of Equity on the Mortgage

The amount of equity not only affects the mortgage amount but also influences mortgage interest rates and long-term financial stability. A higher equity ratio leads to:

• Lower interest costs, as the loan-to-value ratio is reduced
• Better conditions, since the bank assumes less risk
• A more stable financing strategy, as less debt is required

A mortgage comparison can help find the best conditions for your situation and ensure long-term affordability.

Affordability: How Much Mortgage Can I Afford?

In addition to equity, affordability plays a key role in mortgage approval. Banks assess whether a buyer can sustain the ongoing financing costs in the long run. Generally, the following rules apply:

• Monthly expenses for the mortgage, including interest, amortization, and maintenance costs, should not exceed 33% of gross income.
• Banks usually calculate affordability using a theoretical interest rate of 5%, regardless of the current market rate. The reason behind this is to ensure that buyers can still afford their mortgage even if interest rates rise.

To check whether your desired property is financially viable, the HYPOHAUS mortgage calculator can provide an initial assessment.

Calculate Your Financing with Our Mortgage Calculator

How much equity do you need for your dream property? And what would your estimated monthly costs be?

With our mortgage calculator, you can get an exact calculation for your home purchase and, if needed, submit a financing request directly to us. The calculator provides an overview of:

• Your estimated monthly expenses
• The required equity amount
• The loan-to-value ratio of your property and whether affordability is met

In combination with our mortgage comparison, you can find the most attractive offers to optimize your financing. Learn more about our services here.

Try our mortgage calculator now and get a clear assessment of your financial possibilities! Click here to access the calculator.