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What to do in Switzerland if you cannot pay your mortgage

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.

What to do in Switzerland if you cannot pay your mortgage
Financial problems may keep property owners from paying their mortgage rates. Image by Dimitris Vetsikas from Pixabay

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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PROPERTY

Where to find property in Switzerland for under CHF 500k

Switzerland is not known for being a cheap country and property prices are higher than in other European countries, but it's still possible to find property bargains, some for even under CHF 100k.

Where to find property in Switzerland for under CHF 500k

Property prices are rising in much of Europe and Switzerland is no exception. As the average salary is high in Switzerland, finding homes for under CHF 1 million in some parts of the country becomes almost impossible.

Even when you do find cheap properties, they are sometimes quite literally too good to be true. For example, Switzerland’s famous one-franc home scheme had to be scrapped after nobody signed up. The cheap homes were, actually, too expensive when considering the costs for renovation or even how remote they were.

READ ALSO: Six no-gimmick websites that help you save money in Switzerland

Some of the properties in the scheme weren’t connected to the electricity grid, sewer system or even roads.

So, where can we find cheap(er) homes in Switzerland – that are still liveable or could be excellent investments for those who enjoy fixer-uppers (or huge DIY projects)?

Not an easy search

To find these gems, we used a property website that allowed us to search for real estate in the whole of Switzerland (instead of just a few main cities) and showed us homes with at least three rooms.

The price limit was set at CHF 500,000 (while our colleagues in Germany had theirs set at €100k, but, hey, this is Switzerland).

As of August 2022, we found 203 houses and 80 apartments following these criteria on sale.

Most of these definitely need some fixing up, but you can still snatch a home for under CHF 500,000 with lovely views of lakes and mountains or big terraces and gardens.

Going through the addresses with some of the properties, some things stand out:

Head for the border – most of the most affordable places are in Italian-speaking Switzerland. However, you can also find some of them in the French regions. In both cases, they are located very near the border with France or Italy.

Forget about cities – All the properties we found are quite far from the major cities of Zürich, Bern, and Geneva, which makes sense as the cost of living tends to rise in those regions. If you’re looking for a cheap home, you’re highly unlikely to find one in city centres.

READ ALSO: EXPLAINED: Why is Switzerland so expensive?

Consider property type – It is also worth mentioning that there seemed to be a distinction between the homes in the west and those in the south. In the French region, there are more apartments and newer properties, with some outstanding options.

While in the Italian south, most of the properties are houses – and you need to inspect well because some will need a lot of work.

Research services – You should definitely check carefully the property’s location – some are not connected to basic services or even roads.

Renovation costs – Almost all of the properties we found were ‘renovation projects’. Some can turn out to be very good investments, but it takes time and work to renovate. Before buying, get an estimate of the likely works so you can see whether the property really will save you money in the long term, and be honest about your level of DIY/building skills and how much work you are willing or able to do.

Extra costs – Besides renovating costs, you must be mindful of property taxes and other living costs and how much they are in the region where you are buying property. Prices can vary quite widely depending on the canton, so research well.

You can check all our Property in Switzerland stories here.

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