Equity requirements for buying property in Switzerland: sources, rules, and strategy

Equity represents the main obstacle to homeownership in Switzerland. With a minimum requirement of 20% of the purchase price, assembling the necessary down payment requires a well-thought-out strategy. This guide details all the sources you can mobilise, the rules to follow, and strategies to optimise your equity.

The 20% rule: what the regulations say

In Switzerland, the equity requirement is not strictly inscribed in federal law. It stems from the self-regulation directives of the Swiss Bankers Association (SBA), recognised by FINMA as the minimum standard. These directives stipulate that:

• The loan-to-value ratio (LTV) must not exceed 80% of the lending value of the property.
• The lending value corresponds to the lower of the purchase price and the bank's valuation.
• At least 10% of the purchase price must come from "hard" equity, meaning non-pension fund sources.

Concretely, for a CHF 1,000,000 property, you need:

Authorised sources of equity

1. Personal savings

This is the simplest source and the most appreciated by banks. It includes:

• Savings and current accounts
• Securities investments (shares, bonds, investment funds)
• Term deposits
• Precious metals
• Surrender value of life insurance policies (pillar 3b)

Savings count fully as "hard" equity and can be used without restriction.

2. Pillar 3a

Pillar 3a can be withdrawn for financing a primary residence. Two options are available:

• Withdrawal: funds are paid out directly and count as "hard" equity. The withdrawal is subject to a reduced tax rate.
• Pledging: the 3a is pledged to the bank without being withdrawn. You retain the tax advantages but the pledged amount allows the bank to grant an LTV above 80%.

The annual pillar 3a contribution cap is CHF 7,258 in 2026 for employees affiliated with a pension fund.

3. 2nd pillar (LPP / pension fund)

Withdrawing from the 2nd pillar is authorised for purchasing a primary residence. Key points:

• Minimum withdrawal amount: CHF 20,000
• Can only be used for the supplementary 10% of equity (not for the "hard" 10%)
• Possible every 5 years
• Subject to capital withdrawal tax
• Reduces retirement, disability, and death benefits
• Sale restriction with repayment obligation registered on property

From age 50, the withdrawable amount is limited to the higher of the balance at age 50 and half of the current balance.

4. Gifts

A gift from a family member (parents, grandparents) is fully recognised as "hard" equity. The bank requires:

• A written attestation from the donor
• Confirmation that the funds do not need to be repaid
• Proof of the origin of funds (anti-money laundering compliance)

Taxation: gift tax rates vary by canton. In direct line (parent-child), many cantons in western Switzerland exempt gifts: Geneva exempts direct-line gifts, Vaud applies a reduced rate, and Valais also exempts direct-line gifts.

5. Advance on inheritance

An advance on inheritance is an early payment from a future estate. It functions like a gift for banks and counts as "hard" equity. It is reportable to the estate upon distribution, which can create family tensions if not properly documented.

6. Family loans

A family loan may be accepted as equity under certain strict conditions:

• The loan must be subordinated to the mortgage (no priority repayment)
• Some banks do not accept them at all
• It is often counted as a debt in the affordability calculation
• A written contract is essential

Summary table of equity sources

Strategies for assembling your equity

Start saving early

A couple saving CHF 2,000 per month accumulates CHF 120,000 in 5 years (excluding returns). Adding pillar 3a contributions (CHF 7,258 per person per year), the total reaches approximately CHF 192,500 in 5 years.

Open multiple 3a accounts

Spreading your pillar 3a across multiple accounts (up to 5) allows you to optimise taxation at withdrawal. By withdrawing accounts in different years, you avoid the progressivity of the capital withdrawal tax.

Combine sources strategically

Optimal example for a CHF 900,000 purchase:

Favour pledging over withdrawal

If your budget allows, pledging your 3a or 2nd pillar is preferable to withdrawal:

• No capital withdrawal tax
• Preservation of pension benefits (2nd pillar)
• Assets continue to generate returns
• Pillar 3a contributions remain tax-deductible

In return, pledging generally results in a slightly higher interest rate as the effective LTV exceeds 80%.

Special case: lending value below purchase price

If the bank values the property below the purchase price, the difference must be covered by additional equity. Example:

• Purchase price: CHF 1,000,000
• Bank valuation: CHF 950,000
• Maximum mortgage: 80% of CHF 950,000 = CHF 760,000
• Equity required: CHF 1,000,000 - CHF 760,000 = CHF 240,000 (24%)

This scenario is common in overheated markets where properties sell above their appraised value.

What banks verify

When analysing your application, the bank verifies:

• Origin of funds: compliance with anti-money laundering legislation (AMLA)
• Availability: funds must be free of any commitment
• Documentation: bank statements, LPP and 3a attestations, gift deeds
• Consistency: declared funds must match supporting documents