Vacation Properties in Switzerland: Financing Second Homes

An apartment in the Grisons mountains or a chalet in Valais remains a lifelong dream for many. From a bank's perspective, however, a second home falls into a different risk category than an owner-occupied property. Buyers who come under financial pressure usually part with their vacation property first, sometimes below the original purchase price. Banks compensate for this default risk with higher equity requirements, shorter amortization periods, and sometimes a surcharge on the mortgage interest rate. Anyone who is planning a purchase seriously should factor in these additional costs compared to a primary residence from the outset.

Higher Equity Requirement

While banks lend up to 80 percent of the market value for owner-occupied homes, the lending limit for vacation properties, depending on the location and institution, is generally between 50 and 67 percent. Buyers must therefore provide at least a third of the purchase price from their own funds, and often 40 to 50 percent in tourist regions with volatile prices. For properties in prime locations, for example in certain high-priced municipalities in Engadine or the Bernese Oberland, some banks also calculate with safety discounts from the purchase price. The actual payout mortgage will then be lower than the nominal loan-to-value ratio suggests. In addition, there are the standard purchasing costs of 3 to 5 percent of the purchase price for notary fees, land transfer taxes, and deed establishment, which must also be financed from equity.

Stricter Affordability Assessment

Banks check the long-term affordability of vacation properties using a notional interest rate of 5 percent. Added to this are 1 percent for maintenance and ancillary costs, as well as the amortization payments. Total housing costs may not exceed one-third of gross income, with the costs of the primary residence included. Therefore, anyone who owns an owner-occupied apartment with an ongoing mortgage and wants to buy a holiday property in addition must prove affordability for both properties at the same time. In practice, this requires a gross annual income that is significantly above the Swiss median. Some banks also add an interest rate premium of 0.25 to 0.5 percent compared to mortgages on primary residences, since the risk is weighted higher.

Faster Amortization of the Second Mortgage

As with a primary residence, the mortgage is split into a first mortgage up to two-thirds of the market value and a second mortgage above that. For owner-occupied properties, the second mortgage must be amortized within 15 years or by retirement at the latest, but for vacation properties, the term is usually shorter. Ten years is common, and some banks require repayment to 50 percent loan-to-value within this period. The reason again is the risk profile: the bank wants to ensure that even if the property later declines in value, there is still an adequate reserve in the property. Buyers should include the annual amortization burden in their liquidity planning since, unlike with a primary residence, the second mortgage cannot be pushed beyond their working life.

Pension Funds Remain Locked

A key restriction concerns the source of equity. Funds from pension schemes or pillar 3a may only be used for owner-occupied residential property at the main residence, neither as a withdrawal nor as collateral. This means that for many households, a significant part of their theoretically available equity is not available. Buyers must provide the required 33 to 50 percent from freely available assets, i.e., from savings accounts, securities portfolios, advance inheritances, or sales of existing assets. Anyone planning to finance a holiday home via an advance inheritance from their parents should properly clarify the marital and inheritance law consequences to avoid disputes when dividing the estate later.

Lex Weber Limits the Supply

Since the approval of the second home initiative in 2012 and the entry into force of the Second Homes Act, the federal government has regulated the construction of new second homes. In municipalities where second homes account for more than 20 percent, new second homes may generally no longer be approved. About 337 municipalities are affected, most of them in Valais, Grisons, and the Bernese Oberland. Buyers in these regions can now practically only acquire legacy apartments—that is, properties built before the cut-off date—or newly constructed apartments with a requirement for tourist utilization. In autumn 2024, parliament adopted a relaxation: legacy apartments may be demolished, rebuilt, and expanded by up to 30 percent. This rule increases the value of existing properties but has not fundamentally eased the tight supply in the classic tourist regions. For banks' valuation purposes, Lex Weber means that legacy apartments in affected municipalities are considered more stable in value, because supply is structurally limited.

Tax Treatment in Transition

Until now, owners had to tax the deemed rental value (Eigenmietwert) of the holiday apartment as income, usually in the canton where the property is located. In return, mortgage interest and maintenance costs could be deducted. With the referendum of September 28, 2025, the electorate decided to change the system. Deemed rental value will be abolished for primary and second homes, the private interest deduction will be greatly restricted, and the maintenance cost deduction will largely disappear. Cantons will be permitted to introduce a cantonal property tax for owner-occupied second homes. Final implementation is expected by 2029. For buyers of vacation homes, this shifts the logic of taxation: without a deemed rental value, current taxable income is reduced, but at the same time the interest deduction mostly disappears. Highly leveraged buyers tend to lose out, buyers with fully repaid loans benefit. Anyone currently planning a purchase should include the cantonal property tax in their affordability calculations as soon as the canton publishes concrete rates.

Practical Recommendations for Buyers

First, obtain offers from a wide range of banks. Conditions for vacation apartments vary between institutions more than they do for primary residences. Regional banks in the location area often know the local market better and tend to accept higher loan-to-value ratios than large universal banks.

Second, check the municipality's Lex Weber status before signing a purchase agreement. The Swiss Federal Office for Spatial Development maintains a public list of affected municipalities. For legacy apartments, it is worthwhile looking into the land registry and building permit to confirm the status properly.

Third, ensure a generous liquidity buffer. Vacation properties typically have higher maintenance costs than city apartments, from heating to snow removal to the upkeep of outdoor areas. A reserve of 1 to 1.5 percent of the market value per year is realistic.

Fourth, document the intended use clearly. Anyone planning to rent out the apartment at least part-time should discuss the rental model with the bank in advance. Rental income can improve affordability but is conservatively assessed by banks, often only counted at 70 to 80 percent.

Fifth, calculate the tax situation with a trustee. The transition phase until the deemed rental value is fully abolished creates short-term planning uncertainty, especially for high mortgage balances.

Conclusion for the Financing Decision

A vacation property in Switzerland is financeable, but not under the same rules as for a primary home. Anyone who provides at least one third equity from freely available funds, demonstrates solid affordability on both properties, and is familiar with the regulatory framework will find suitable mortgage solutions even in classic tourist regions. The system change for the deemed rental value will reshuffle the numbers over the next few years. Until the final implementation, it is worthwhile structuring the financing flexibly and keeping an eye on tax developments in the location canton.

Sources: UBS, Migros Bank, Homegate, Federal Office for Spatial Development.