Mortgages From Swiss Pension Funds Explained

Most people in Switzerland automatically relate mortgages with banks. That makes sense, because banks are still the go-to destination for the majority of Swiss home buyers.

Many consumers are not even aware of the fact that many Swiss pension funds also offer mortgages. What is more, the majority of pension funds that offer mortgages also offer them to people who are not participants or pensioners with the same pension fund. 

Here, moneyland.ch answers the most important questions about mortgages from Swiss pension funds.

Which Swiss pension funds offer mortgages?

Many Swiss pension funds offer mortgages to private home buyers. You can find a detailed overview of the mortgage offers from 29 pension funds in the PDF available below.

Do Swiss pension funds only offer mortgages to their participants?

There are some pension funds that only offer mortgages to people who are enrolled in their pension plans or who receive a pension from them. You can find an overview of these in table 2 in the PDF.

What are the advantages of mortgages from pension funds?

The biggest advantage are the low interest rates. Mortgages from Swiss pension funds are often relatively cheap. You can find a detailed overview in the guide to mortgages from banks, insurance companies, and pension funds.

What are the disadvantages of pension fund mortgages?

Unlike mortgages from Swiss banks, many pension funds only offer a limited range of mortgage models. SARON mortgages, construction loans, and other more complex financing products are rarely offered. Pension funds also tend to be more conservative in terms of the properties they finance, and often do not accept mortgages for investment properties or holiday homes.

Compared to banks, pension funds typically have less experience with mortgage consultation. Some pension funds offer their mortgages through third-party mortgage brokers which handle the customer onboarding, consultation, and customer care.

Are there geographical limitations?

Yes, and these are often stricter than those of banks and insurance companies. For example, the Aargauische Pensionskasse, the Personalvorsorge des Kantons Zürich (BVK) and the St. Galler Pensionskasse only finance properties in German-speaking Switzerland. The Personalvorsorgekasse der Stadt Bern only finances homes in the canton of Bern.

Which mortgage models do pension funds offer?

Pension funds focus on fixed-rate mortgages (FRMs), but many also offer adjustable-rate mortgages (ARMs). There are also pension funds that offer SARON mortgages.

Some pension funds also offer forward mortgages with lock-in periods of up to 24 months.

Which types of property can I finance with Swiss pension fund mortgages?

Swiss pension funds primarily finance homes used as primary residences. Some pension funds also finance other types of real estate like holiday homes or investment properties.

What are the collateral requirements?

Much like banks and insurance companies, many pension funds have a maximum loan-to-value ratio of 80 percent. Some pension funds will only finance up to 75 percent of a property’s collateral value.

As a whole, pension funds are more restrictive with regards to second mortgages (the part of a mortgage which exceeds 66 percent of collateral value). Some pension funds do not offer second mortgages at all, while others only provide them if you agree to pledge pension fund benefits or pillar 3a assets as collateral.

There are also pension funds which only offer second mortgages to people who are subscribed to their pension plans. Non-participants can only obtain first mortgages.

Which affordability rules apply to Swiss pension fund mortgages?

Like banks and insurance companies, Swiss pension funds require a cost-to-income ratio of around 33 percent. That means the combined costs of interest, amortization, and maintenance should not exceed one-third of your income.

Which mortgage terms to pension funds offer?

The majority of relevant pension funds offer fixed-rate mortgages with terms of 2 to 10. But some pension funds also offer terms as long as 20 years.

What is the minimum and maximum mortgage size?

As with insurance companies and banks, some pension funds require minimum mortgage sizes of 100,000 to 200,000 Swiss francs. The maximum mortgage size is typically 1, 1.5, or 2 million francs.

Do pension funds offer special discounts?

As with banks, there are a number of pension funds that have special, lower interest rates for energy-efficient housing. But unlike most banks, the mortgage interest rates of many pension funds are not negotiable.

Do pension funds offer indirect amortization?

Second mortgages have to be amortized within 15 years or by retirement (whichever comes first). This can be done directly or indirectly. In direct amortization, payments are applied directly to mortgages and reduce your mortgage debt. With indirect amortization, you make payments to the tax-privileged pillar 3a, and these assets, in turn, are pledged to the lender as collateral against your debt.

Some Swiss pension funds offer indirect amortization. The Aargauische Pensionskasse (APK), for example, lets you indirectly amortize mortgages via a pillar 3a account at the Aargauischen Kantonalbank.

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