Second Mortgage

In Switzerland, when a mortgage covers more than 2/3 of a home’s collateral value, the outstanding portion of the mortgage (above the 2/3 mark) is known as a second mortgage.

A second mortgage must be fully amortized (see more on amortization here). The difference between the entire amount owed on the mortgage and the second mortgage makes up the first mortgage.

Banks and insurers often charge higher mortgage rates for a second mortgage. This is justified by the high loan-to-value ration (over 2/3), which brings a higher level of risk for lenders.

Second mortgage - example

Collateral value (purchasing price): 600,000 francs (100%)
Down payment: 120,000 francs (20%)
First mortgage: 400,000 francs (66 2/3 %)
Second mortgage: 80,000 francs (13 1/3%)
Total mortgage: 480,000 francs (80%)

More information:
Mortgages in Switzerland compared
First mortgage - simply explained
What is a loan-to-value ratio?
Indirect Amortization - simply explained
Amortization - simply explained

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