Equity / Down payment
Personal funds required for a property purchase.
Equity represents the personal funds the buyer must provide to obtain a mortgage. In Switzerland, the minimum is generally 20% of the property value.
Of which at least 10% must come from 'hard' equity (excluding 2nd pillar): savings, pillar 3a, gifts, inheritance, advance on inheritance.
The remaining 10% can come from the 2nd pillar (LPP/BVG), under certain conditions.
Equity serves to reduce risk for the bank and limit the borrower's debt level.
Related terms
LTV / Loan-to-value
Ratio between the loan amount and the property value.
Occupational pension (LPP/BVG)
2nd pillar -- can be used for primary residence purchase.
Pillar 3a
Tax-advantaged tied pension savings, usable for mortgage and tax-deductible.
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