Financing homeownership: The path to your dream home

The dream of owning your own home starts with the right financing. Two building blocks are crucial here: Equity and a mortgage, which together form the financial foundation for your home. Ongoing costs also play a decisive role in ensuring that the financing continues to work in the long term:

• Interest on the mortgage
• Amortization (repayment of the 2nd mortgage)
• Ancillary costs for maintenance and use

These ongoing costs must be permanently covered by your income – that is the core principle to ensure affordability. 

When buying a property, banks and insurance companies generally require buyers to contribute at least 20% of the purchase price themselves. This equity can come from savings, securities, gifts or pillar 3a. If you want to use funds from a pension fund, you have two options:

• Early withdrawal: The capital is withdrawn directly and used as equity. However, this reduces the retirement pension and the insurance benefits.
• Pledging: The money remains in the pension fund, but serves as security. This allows you to take out a higher mortgage without reducing your pension benefits.

You should carefully consider which option suits you best – including with regard to your retirement provision.

Please note that additional notary fees and transfer taxes are payable on the purchase, which cannot be covered by the 20% equity. It is therefore worth planning a reserve to prevent financial shortfalls.

Buyers finance the majority of the purchase price via a mortgage – i.e. a loan that is secured against the property itself. In Switzerland, banks finance a maximum of 80% of the purchase price.

This mortgage is divided into two parts:

• 1^st mortgage: Covers around 65% of the purchase price.
• 2^nd mortgage: Covers the amount between 65% and 80%. This must be repaid within 15 years or by the time you retire.

This split ensures that debt decreases over the years and that financing remains affordable in the long term.

Not every mortgage works the same. You can choose between different models – and combine them to suit your personal goals and wishes: 

• Fixed-rate mortgage: The interest rate remains the same for several years. This creates planning security, but is less flexible if interest rates fall.
• SARON mortgage: The interest rate is adjusted regularly and is based on the money market. With low interest rates, it is favorable, but there is a risk of rising costs.
• Variable-rate mortgage: Here, the interest rate is constantly adjusted to the market situation. It is very flexible, but usually more expensive than other models.

Which solution is right for you depends on your personal situation and your need for security. The following questions can help you decide on the right mortgage model:

• Will I sleep better if I know my fixed costs in the long term?
• Do I have reserves to bridge a period of higher costs?
• How flexible am I in adapting my plans if the framework conditions change?

Your house is more than just a piece of real estate – it is your home and an important part of your future. To ensure that financing works today, and remains stable in the coming years, it is worth thinking about additional protection.

Zurich offers various retirement solutions that enable you to close risk-related gaps:

• Risk life insurance: Protects your family in the event of your death and ensures that the mortgage remains affordable.
• Disability insurance: Secures your income if you are no longer able to work due to an accident or illness.
• Savings insurance: Helps you to build up return-oriented savings capital and enables you to achieve your savings goal.

With these solutions, you can secure your homeownership financing – and thus create the basis for ensuring that your dream home remains affordable, regardless of how your life develops.