Amortising means repaying the capital on your mortgage — and the second charge must be repaid, until the debt is brought down to two-thirds of the property’s value. But the law does not say how: in Switzerland, two mechanisms coexist, and the choice between direct and indirect amortisation shows up, year after year, on your tax return.
Direct amortisation: the debt falls
You repay the bank periodically. The capital decreases, so the interest decreases with it — and your net worth rises accordingly. It is the most transparent mechanism: every payment shows on the statement.
Its drawback is fiscal, under the current system: less debt means less deductible interest — and the money paid to the bank does not open any deduction.
Indirect amortisation: the debt stays, the savings rise
You repay nothing: your payments feed a pledged pillar 3a in favour of the bank. The borrowed capital remains constant until maturity, when the accumulated savings repay the mortgage — often at retirement.
The advantage is twofold under the current system: 3a payments are deducted from taxable income, and the intact debt keeps interest deductible. The savings, meanwhile, grow sheltered from tax until withdrawal.
The two mechanisms, side by side
| Direct | Indirect | |
|---|---|---|
| Debt | Decreases with each payment | Constant until maturity |
| Interest paid | Decreases with the debt | Constant |
| Tax deduction | None on payments | 3a payments deductible |
| Transparency | Maximum | Requires monitoring (3a + loan) |
| At maturity | Debt reduced progressively | Repayment in one go via the 3a |
What 2029 changes for the calculation
The imputed rental value reform abolishes, from 1 January 2029, the deduction of mortgage interest for a main residence. Half the argument for indirect amortisation — “keep the debt to deduct the interest” — disappears from that date. The other half remains: 3a payments stay deductible, and the savings continue to grow sheltered from tax.
Practical consequence: arrangements signed today run beyond 2029. An indirect scheme chosen solely for the interest deduction is worth recalculating — ideally at the next renewal.
A worked example
A property worth one million, financed at 80%: 800,000 francs borrowed. Two-thirds of the value — 666,700 francs — make up the first charge, with no obligation to amortise. The remaining balance of around 133,300 francs is the second charge, to be brought down to zero over fifteen years: nearly 8,900 francs per year.
Under direct amortisation, these 8,900 francs extinguish the debt: each year, the interest decreases slightly. Under indirect amortisation, they go into the 3a — deducted from taxable income at your marginal rate, within the annual ceiling for tied pension provision — 7,258 francs in 2026 for an employee affiliated to a pension fund — while the debt and its interest remain constant. At Geneva’s high tax rates, the annual deduction adds up significantly over fifteen years: that is the whole point of the trade-off.
The Geneva argument that gets overlooked: wealth tax
The debate almost always plays out on income — interest deduction, 3a deduction. In Geneva, where wealth tax bites hard, it also plays out on assets, and the effect runs in the same direction.
A mortgage debt is deducted from taxable wealth. Direct amortisation reduces it every year: your net worth rises accordingly, and so does the tax on it. Indirect amortisation, by contrast, keeps the debt whole on the balance sheet — while the capital accumulated in the 3a, as long as it stays within the deduction ceiling, does not enter taxable wealth; only the portion paid in beyond the ceiling is added to it.
In other words: under direct amortisation, your savings are visible to the tax authorities; under indirect amortisation, they grow sheltered, and the debt continues to lighten the tax base. This is the only argument for indirect amortisation that the 2029 reform does not touch — it removes the interest deduction, not the treatment of debt within wealth or that of the 3a.
The drawback of indirect amortisation, not to be discovered at maturity
Two trade-offs, often forgotten in the fiscal enthusiasm. First, the 3a capital does not belong to you freely: it is pledged in favour of the bank, so unavailable for anything else until it is unwound. Second, its withdrawal is taxed: the withdrawal is taxed separately from income, at a reduced rate, but it is taxed. Withdrawing fifteen years of savings in one go places this capital in a heavier bracket than if withdrawals are staggered over several years — which requires several 3a accounts opened well before the deadline, not at the point of settlement.
The fiscal gain of indirect amortisation is therefore measured net of this withdrawal, not gross of the annual deductions. This is the line the table above does not show, and the one that tips certain cases.
How to choose, in practice
- Your tax rate — the higher it is, the more the 3a deduction of indirect amortisation pays off: in Geneva, where taxation bites, indirect amortisation has long been the norm for high earners;
- your time horizon — indirect amortisation is unwound at maturity, often at retirement: it requires holding the debt until then;
- your need for transparency — direct amortisation is understood in one line; indirect amortisation requires tracking two accounts and a pledge;
- your tolerance for debt — some sleep badly with a constant capital balance; this factor cannot be calculated.
The amount to be amortised, however, is not a matter of choice: the second charge must come down within the set deadlines — the mechanism of charges is explained in our mortgage guide, and the affordability requirements in What income to buy in Geneva.
In practice
Test both scenarios with real figures using our mortgage simulator, and have the fiscal trade-off validated by your adviser — it depends on your municipality, your marginal rate and your pension arrangements. Our brokers see both schemes pass through every week: tell us about your situation. The terms on this page are defined in the glossary.