Amortisation
Gradual repayment of the mortgage principal.
Amortisation is the gradual repayment of borrowed capital. In Switzerland, it mainly concerns the 2nd mortgage rank (the portion between 67% and 80% of the property value), which must be repaid within a maximum of 15 years or before retirement.
There are two forms of amortisation: — Direct: regular payments to the bank, immediate debt reduction. — Indirect: payments into a pledged pillar 3a, lump-sum repayment at maturity.
Indirect amortisation is often more tax-efficient, because mortgage interest remains deductible for longer and pillar 3a contributions are also deductible.
Related terms
Second rank
The mortgage portion between 67% and 80% of property value.
Pillar 3a
Tax-advantaged tied pension savings, usable for mortgage and tax-deductible.
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