The basics of equity capital requirements for real estate financing in Switzerland

When it comes to obtaining real estate financing for a primary residence, equity, income and bank appraisal of the property play a crucial role. Equity represents the part of the purchase price of a property that the borrower must finance from his or her own resources. In this article, we’ll look at the basic points concerning the equity required to obtain real estate financing in Switzerland.

The financing rule commonly accepted by financial institutions in Switzerland for the purchase of a principal residence is 80% of the value of the property. In certain cases, lenders may raise the financing percentage to 90%. This loan configuration implies the pledging of counter-guarantees on the one hand, and a charge rate of less than 33.34% despite additional costs on the other.

Equity requirements may vary depending on the type of purchase (primary residence, secondary residence, investment property). For the purchase of a principal residence, the equity can come from pension assets in the form of 2nd and 3rd pillars, but must be made up at least of liquid assets amounting to 10% of the value of the property. The buyer will also need to retain additional cash to cover acquisition costs (notary’s fees, creation of a schedule, transfer tax, etc.), often simulated at 4.5% in the French-speaking cantons.

Financial institutions in Switzerland are obliged to verify the origin of the equity provided by the borrower. Equity must come from legal and verifiable sources, such as personal savings, inheritances, gifts or cash from the sale of another property. Lenders often require appropriate supporting documentation, such as bank statements, contracts of sale or letters of gift, and require that equity be included in tax returns.

Obtaining the necessary equity for real estate financing in Switzerland can require careful financial planning. It’s essential to start saving early and build up a solid savings reserve. In addition, it may be wise to limit non-essential expenditure and establish a strict budget to save effectively. Good long-term financial management can help you reach your equity goals more quickly.

In Switzerland, borrowers can use their pension provision, also known as the 2nd or 3rd pillar, as a potential source of equity. However, it is important to note that the use of pension funds may be subject to certain conditions and restrictions. It is advisable to consult a financial advisor or pension specialist to assess the advantages and disadvantages of this option.

To obtain real estate financing in Switzerland, it is crucial to have sufficient equity. Equity requirements may vary depending on the financial institution and the type of acquisition, but in general, a minimum of 25% of the purchase price (including acquisition costs) is often required. It is important to plan and save sufficiently in advance, taking into account restrictions and legal sources of funds. Careful financial planning and building up a solid savings reserve can help you reach the equity targets required to complete your real estate project in Switzerland. Don’t forget to consult financial professionals for advice tailored to your specific situation.