In Geneva, the question is almost never “can I borrow?” but “what income will the bank require?”. The answer does not depend on your banker: all Swiss banks apply the same calculation, and it is public. Here is how it works, and what it gives for a property at one, one and a half, or two million.
The rule that all banks apply
A bank does not lend based on what you pay today, but on what you would pay if rates rose again. It adds up three theoretical charges and checks that they do not exceed a third of your gross income.
The theoretical interest rate
Around 5% of the amount borrowed, regardless of the actual rate at the time. It is a stress test: the bank wants to know whether you would withstand a reversal, not whether you can manage today. This is why an attractive market rate changes nothing about your purchasing capacity.
Amortisation
1% of the property price per year. The debt must be brought down to two-thirds of the property’s value within a set period; this amortisation is compulsory, not optional.
Upkeep costs
1% of the property price per year, on a flat-rate basis. Whether you carry out maintenance or not, the bank counts it.
The total of these three charges must not exceed 33% of annual gross income. Some institutions tolerate up to 40%, but the majority stop at a third.
The income required, price by price
With 20% own funds, here is what the calculation gives.
| Property price | Own funds (20%) | Loan | Annual charges | Minimum gross income |
|---|---|---|---|---|
| CHF 1’000’000 | CHF 200’000 | CHF 800’000 | CHF 60’000 | CHF 181’800 |
| CHF 1’500’000 | CHF 300’000 | CHF 1’200’000 | CHF 90’000 | CHF 272’700 |
| CHF 2’000’000 | CHF 400’000 | CHF 1’600’000 | CHF 120’000 | CHF 363’600 |
The detail for a two-million property: 1,600,000 borrowed × 5% = 80,000 francs in theoretical interest, plus 20,000 in amortisation and 20,000 in upkeep, totalling 120,000 francs in charges. Divided by 33%, this gives an annual gross income of 363,600 francs.
These figures explain the structure of the Geneva market better than any commentary: at this level of requirement, a significant proportion of transactions are made with own funds well above 20%. Our mortgage simulator redoes this calculation with your actual figures.
Own funds: how much, and from where
The 20% minimum
No Swiss bank finances beyond 80% of the property’s value. Note: this is the value used by the bank, not the price you pay. If its valuation places the property below the agreed price, the difference is added to your own funds.
What the second pillar allows, and does not allow
You can draw on your occupational pension assets for your main residence, either by withdrawal or by pledging. But banking self-regulation requires that at least 10% of the property’s value come from elsewhere: savings, third pillar, gift, securities. In other words, a purchase cannot be financed with the second pillar alone.
A withdrawal reduces your retirement capital and your disability and death benefits. Pledging preserves these, but does not ease the charges calculation.
The second pillar has its own timing rules
“I’ll draw on my second pillar” is easy to say. In practice, early withdrawal is governed by four rules that determine whether your project holds up or not, and they must be checked before making an offer.
- A floor. The minimum amount for an early withdrawal is 20,000 francs. Below that, the question does not arise.
- A pace. An early withdrawal can only be requested once every five years. Someone who drew on it for a first home three years ago cannot do so again today.
- A ceiling after age 50. Insured persons over 50 obtain at most the vested benefits they were entitled to at age 50, or half of what they are entitled to at the time of withdrawal. For a career that has progressed well after fifty, the gap between the amount shown on the certificate and the sum actually available can be considerable.
- A cut-off date. The withdrawal must be requested at the latest three years before entitlement to retirement benefits arises.
These four rules combine with the one already mentioned — at least 10% of the property’s value must come from sources other than the second pillar. And they combine with a fifth, which applies on exit: if you later sell the home financed in this way, the early withdrawal must be repaid, unless reinvested in a new owner-occupied home within two years. Ask your pension fund for a precise breakdown before building a financing plan on this basis: it is free, and it is better than finding out after an offer has been accepted.
Types of mortgage loans
Three forms coexist in Switzerland. The fixed-rate mortgage locks in the rate for a chosen term — security, at the cost of a penalty in the event of early repayment. The variable-rate mortgage follows the market, with no fixed term. The SARON mortgage is indexed to the Swiss reference rate and is revised at short intervals: cheaper on average, but more exposed to fluctuations.
The loan is secured by a mortgage note (cédule hypothécaire), registered in the land registry. Setting it up involves a cost that must be included in the acquisition budget.
Should you go through a financing broker?
A broker puts institutions in competition with one another and negotiates terms that an individual rarely obtains alone. This is useful when the file is out of the ordinary: variable income, self-employed status, foreign residents, an atypical property.
For a straightforward file with a comfortable income, the difference narrows. We guide our clients towards one option or the other depending on the situation, without any payment to us either way.
What this means for Geneva
The canton has some of the highest prices in Switzerland, with properties often above one million. The calculation above becomes the first filter here: it determines your search range before you even start viewing properties.
Our advice is constant: have your purchasing capacity established before you start viewings. You will avoid falling for a property the bank will refuse, and you will negotiate from a position of strength with a seller who knows your financing is secured. Check prices by municipality to define your range, and the properties available within that bracket. If you are selling to buy again, a valuation of your current property sets the starting point.