Have you already planned your next vacation? If you owned a vacation apartment in the Engadine or a vacation home in Ticino, all you'd have to do is enter vacations and pack your bags instead of planning for a long time. That's what many Swiss have been saying to themselves since the Corona pandemic broke out: demand for vacation properties in Switzerland has risen sharply since 2020. Prices for second homes, which had stagnated or increased slightly for years, rose more sharply than for owner-occupied residential property in 2020 and 2021. Especially in Graubünden, the Bernese Oberland and Central Switzerland. Just under one-sixth of the 4.61 million residential units in Switzerland are second homes, i.e. vacation apartments or vacation homes in tourist communities. The supply is scarce because in many communities, due to the "Lex Weber" or second-home initiative, no new construction permits for classic second homes without use restrictions may be issued since 2021. Today, the chances of finding a vacation home or apartment are greatest in Valais or Ticino. What should you know about financing before you start looking for properties and apply for a mortgage?
Owner-occupied residential property is mortgaged up to 80 percent, while vacation homes and apartments are only mortgaged 50 percent to a maximum of 70 percent. That's why you need more equity. For example, if you buy a vacation home for 750,000 Swiss francs, you need to bring in 225,000 to 375,000 Swiss francs in equity. Why? The default risk for the bank is higher because most borrowers sell their vacation home or apartment when they have money problems - and those who have to sell often sell below market value. With the lower loan-to-value, the banks minimize their default risk.
The same rules apply to the affordability calculation for vacation properties as for owner-occupied residential property. The housing costs (5 percent imputed mortgage interest, ancillary costs, maintenance costs and amortization) may not exceed one third of your gross household income. But: For the calculation, the housing costs are added together. For example, if you own an apartment in Bern as your primary residence and a house in the Verzasca Valley as your secondary residence, the housing costs for both properties may not exceed one third of your gross household income.
For owner-occupied residential property, you can contribute money from your pension fund (2nd pillar) or private pension plan (pillar 3a) as equity. No pension assets may be drawn down in advance or pledged for vacation homes and vacation apartments, not even for the amortization of the mortgage debt. Why? With this ban, the state wants to prevent pension assets from being put at risk for a vacation home or apartment and the owner becoming needy in old age and having to sell the house or apartment for less than its value at the worst possible moment.
If you need a 2nd mortgage (up to 80 percent) for owner-occupied residential property in addition to the 1st mortgage (up to 65 percent), you must amortize, i.e. repay, the 2nd mortgage within 15 years. Stricter amortization requirements apply to vacation homes and vacation apartments. They are not legally required like the amortization of the 2nd mortgage and vary from bank to bank. Most banks require that mortgages for vacation properties be repaid to below 50 percent in 10 to 15 years or by the time a person reaches retirement age.
The impetus for this article came from a reader who asked why mortgages for vacation homes or apartments are more expensive than for owner-occupied housing. That's not true. Not entirely. There are banks that charge higher mortgage rates for vacation properties. With the higher interest income, they want to compensate for the higher default risk of financing for vacation apartments or houses. If you are unhappy with the terms, talk to the bank and point out the interest rate difference. There are enough banks that do not distinguish between owner-occupied housing and vacation properties when it comes to interest rates. With our mortgage comparison, you can compare mortgage models, terms and interest rates and combine the most attractive offers from different providers, even for vacation homes or vacation apartments.
Swiss banks generally do not finance vacation homes or apartments abroad. If you want to buy a country estate in Tuscany or a city apartment in Barcelona and obtain debt financing, you need to talk to a local bank about the financing. Interest rates and therefore mortgage rates in Switzerland are low by international standards, even after the recent interest rate increases. That's why you have to expect significantly higher interest and thus housing costs when financing real estate abroad than in Switzerland.
You must pay tax on a vacation home or apartment in the same way as on your main residence. The market value as an asset where you are liable to tax, the imputed rental value less maintenance costs and mortgage interest as income at the location of the property. The imputed rental value varies from canton to canton, regardless of how many weeks or months you spend in your vacation home or apartment. If you rent out the house or apartment, you must pay tax on the rental income less maintenance costs and mortgage interest as income. If you partially rent out the property, the imputed rental value and rental income are calculated on a pro rata basis.