Collateral Value

The term «collateral value» is used in credit checks relating to a secured loan, primarily mortgages. In Switzerland, either the market value or purchase price of a property, whichever is lower, determines its value as collateral against a loan.

Since 2014, Swiss banking guidelines have followed the lower of cost or market value principle. According to this principle, a property’s collateral value is always used when calculating the loan-to-value ratio of a mortgage. Before 2014, the loan-to-value ratio was often based on the purchase price of a property, even if that price was inflated in relation to actual market value.

More information:
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