Equity Requirements for Swiss Property Buyers

The 20 percent minimum

Swiss banking regulations require all property buyers to contribute a minimum of 20 percent of the purchase price from their own funds (fonds propres). This is a regulatory minimum — individual banks may require more, particularly for non-residents, investment properties or properties in certain market segments.

Of the 20 percent minimum, at least 10 percent must come from "hard" equity — cash savings, securities, proceeds from the sale of another property or gifts/inheritance. The remaining 10 percent can come from pension fund assets (2nd pillar) under certain conditions.

Pension fund equity (2nd pillar)

Swiss residents who are members of the occupational pension system (2nd pillar — prévoyance professionnelle) can use their pension fund assets to fund up to 10 percent of the equity requirement for the purchase of a primary residence. This is known as an advance withdrawal (retrait anticipé) or a pledge (mise en gage) of pension assets.

An advance withdrawal reduces the pension fund balance and therefore the future pension entitlement. A pledge keeps the pension assets in the fund but pledges them as security for the mortgage. Both options are subject to conditions and tax implications — buyers should seek advice from a pension specialist before using pension assets for a property purchase.

Higher equity for specific situations

Swiss banks typically require higher equity in several situations: for non-resident foreign buyers (30 to 40 percent); for the purchase of investment properties or secondary residences (25 to 35 percent); for buyers with variable or uncertain income (25 to 30 percent); and for properties in niche markets where the bank's valuation may be conservative.

In the Montreux luxury market, banks sometimes require higher equity for exceptional properties — particularly those with premium lake views or unique features that command a price premium above comparable sales.

Equity beyond the minimum

While the regulatory minimum is 20 percent, many buyers in the Montreux market choose to contribute more equity — 30 to 40 percent or more. A higher equity contribution reduces the mortgage amount, reduces the annual interest cost and makes the affordability test easier to pass. It also reduces the risk of negative equity if property values decline.

For buyers who can afford to contribute more equity, a higher equity contribution is generally advisable — particularly in the current interest rate environment where the gap between the 5 percent notional rate used in the affordability test and actual market rates is significant.

Key points

• Minimum equity: 20% of purchase price (regulatory minimum)
• At least 10% must be "hard" equity — cash, securities, liquid assets
• Up to 10% can be pension fund (2nd pillar) for primary residence only
• Non-residents / investment / secondary: typically 30–40% required
• Higher equity reduces mortgage cost and simplifies affordability test