Refurbishment, renovation or modernization cleverly financed

Before you embark on a remodeling project, it is worth clarifying one fundamental question: What do you want to achieve with the project? Is it about repairing damage and restoring the building fabric? Do you want to improve the comfort and appearance of your home? Or do you wish to bring your property up to date with the latest technology and increase its value in the long term? The scope, costs and financing options vary depending on the objective. 

Renovation – when the building fabric needs to be restored
Renovation is advisable if there is damage or structural defects. The aim is to restore the original condition and avoid major subsequent costs.

Typical examples:

• Replacing the roof
• Sealing facades
• Repairing damage caused by damp

Renovations often cannot be postponed. They primarily serve to maintain the value of your property.

Refurbishment – when the focus is on comfort
During a refurbishment, you improve the appearance or use of your property – without making deep interventions that affect the building fabric.

Typical examples:

• Painting walls
• Replacing floors
• Freshening up the bathroom

Refurbishments increase your personal well-being and can moderately increase the market value.

Modernization – when you invest in the future
Modernization brings your property up to date with the latest technology. The focus is often on energy efficiency, sustainability and long-term cost savings.

Typical examples:

• Replacing traditional heating with a heat pump
• New, energy-efficient windows
• Installation of a solar power system

In many cases, modernization increases the value of the property and reduces ongoing energy costs.

If you want to use your pension capital for a renovation, two sources can be considered: pillar 3a and assets from your pension fund (BVG).

Pension assets from pillar 3a or your pension fund may be used for value-enhancing investments in residential property – for example, for energy-related renovations, a new kitchen or a heating system upgrade. However, purely value-preserving measures such as minor repairs are excluded.

Prerequisites

• The measure must demonstrably increase the value of the property.
• Payment must be applied for in good time – before the work begins.
• Use is regulated by law and in some cases requires authorization.

Advantages

• Alterations can often be financed more quickly and without additional borrowing.
• You can use existing capital in a targeted manner without affecting your liquidity in everyday life or impairing affordability with a higher mortgage.

Risks

• If you withdraw pension capital, you reduce your retirement provision savings – this creates a pension gap.
• If the property is sold before retirement, subsequent repayments may be due.
• The funds available are limited.

The tax situation for homeowners is set to change fundamentally: On September 28, 2025, the Swiss electorate approved the abolition of the imputed rental value. 

You can find out more about the effects of the vote in our article Imputed rental value will be abolished – these are the consequences. 

The current law will remain in force until the system changes – probably in 2028 at the earliest. This means that value-preserving costs such as repairs, maintenance and energy-related improvements (insulation, new windows, heating replacement) can still be deducted from taxable income.

With the abolition of the imputed rental value, deductions for mortgage interest, maintenance and renovation costs, as well as energy-related measures, will no longer apply at federal level for owner-occupied residential property. For owners of properties in need of renovation, this may lead to tax disadvantages in the year the renovation takes place. 

Anyone who withdraws money from pillar 3a or their pension fund to finance their renovation or modernization will still benefit from a tax advantage after the system changes: Until further notice, such withdrawals will be taxed separately from other income and at a reduced rate.

In addition, if you deliberately spread larger investments over several tax years, you can further reduce the overall burden – an effect that is particularly noticeable now, while the maintenance deductions are still in place.

A renovation or modernization project raises many questions about financing, taxes and retirement provision. Zurich supports you in making the right decisions:

• Individual analysis: We will examine your personal situation together and show you how you can use pension capital sensibly for your project.
• Holistic financial planning: We will help you to avoid risks and pension gaps – and give you specific tips on how to make the most of tax advantages.
• Clear roadmap: You will receive specific recommendations – from planning and implementation to tax processing.