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What to do in Switzerland if you cannot pay your mortgage

Helena Bachmann in Geneva
Helena Bachmann in Geneva - [email protected] • 27 May, 2022 Updated Fri 27 May 2022 18:27 CEST
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Financial problems may keep property owners from paying their mortgage rates. Image by Dimitris Vetsikas from Pixabay

Hopefully such a situation will never happen to you, but knowing what the laws and practices are in this regard in Switzerland could put your mind at ease.

Most home or apartment owners in Switzerland are relatively wealthy because property prices here are high, especially in or near urban centres like Geneva, Zurich, and Basel, or locations with a high concentration of multinational companies and residents, such as Zug and Lausanne.

READ MORE: Swiss property prices see strongest rise in years

To get a mortgage you must prove high enough income or personal assets, so anyone not seen as able to pay interest rates will not be given a loan.

Still, financial situations can change and a mortgage that was once comfortable becomes unaffordable.

One thing that may alleviate your concerns is that — unlike many other countries — Swiss banks or other lenders don’t expect you to pay off the mortgage in its entirety.

As long as you can pay the interest rates, you are fine.

In fact, not paying off your mortgage is considered to make good financial sense, and the Swiss certainly know a thing or two about astute finances.

This article explains why that is:

EXPLAINED: Why not paying off your mortgage in Switzerland can save you money

So if you find yourself strapped financially, at least you don’t have to worry about paying off your whole mortgage.

You do, however, have to continue to pay the interest rates on the mortgage.

One thing you may be wondering about is whether the bank / mortgage lender can seize your house and whether you will have to move out.

In theory, this is a possibility, according to the so-called promissory note which you signed when you took out your mortgage. In practice, this rarely happens in Switzerland and only as a last resort in extreme situations (as opposed to, say, the United States, where banks routinely foreclose and sell properties for non-payment of mortgage).

Instead, most Swiss mortgage lending institutions will try to help you, at least temporarily,  to find a viable solution, including deferring of payment.

A lot will depend on your standing and previous relationship with the bank — in other words, if you are a longtime client and have some investments or other assets, that could help you buy some time.

Ultimately, however, banks are not in a charity business and they want to make money, rather than lose it. So if your inability to pay interest rates continues, you may eventually have to sell the property and pay off the debt.

One thing to keep in mind before you ask for a mortgage is to take out an insurance policy that will take effect in case you are later unable to pay your interest rates due to a job loss or other factors beyond your control.

You may also want to consider getting debt counseling, available through charitable organisations like Caritas, 

READ MORE: EXPLAINED: How to save on your mortgage in Switzerland
 

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Helena Bachmann in Geneva 2022/05/27 18:27

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