Is it possible to become a homeowner in Switzerland without equity capital?
In Switzerland, purchasing real estate generally requires a personal contribution of at least 20% of the purchase price, part of which must be in cash. This rule represents a major obstacle for many households. However, certain alternatives make it possible to consider homeownership even without traditional equity.
- Use of pension assets (BVG, 3rd pillar)
- Pledging an existing property
- Advance on inheritance or donation
- Third-party loans
- Cooperative bond
This 20% equity rule aims to limit the risks associated with debt, both for borrowers and financial institutions. By requiring a personal contribution, banks ensure that the buyer has a minimum savings capacity and a certain level of financial stability. This helps reduce the risk of default and contributes to preventing overheating in the real estate market by avoiding overly easy access to credit.
1. Use of pension assets
Pension assets can be used in several ways to become a homeowner, either through pledging or withdrawal, via the 2nd pillar or the 3rd pillar.
Pledging
Pledging consists of using your pension assets (3rd or 2nd pillar) as a guarantee to obtain a higher mortgage, without withdrawing the funds. This solution allows the buyer to offset a lack of liquidity while keeping their pension capital intact, thus avoiding a loss of benefits in the event of disability.
In practice, the bank records the assets as an additional guarantee, and the conditions are similar to those of a withdrawal. The main advantage is tax-related: pledged assets remain invested and continue to generate interest or returns. On the other hand, this often means having to bear higher interest charges, as the lender assumes a greater level of risk. It is therefore essential to assess your ability to cover long-term costs.
EPL withdrawal
The EPL withdrawal (Encouragement of Home Ownership) allows the use of pension assets to directly finance the purchase of a primary residence. It applies to funds from the 3rd pillar (3a) and the 2nd pillar (LPP). Unlike pledging, the capital is actually withdrawn from the account or pension fund to be used in financing the property.
In the case of the 2nd pillar, the withdrawal is possible up to the age of 50 for the entire amount saved. Beyond that age, the amount is limited. This withdrawal is subject to conditions: the property must serve as the main residence, and spousal consent is required. For the 3rd pillar tied (3a), the capital can also be withdrawn under the EPL framework, provided it is used for the purchase, construction, or amortization of the mortgage. The 3rd pillar flexible (3b) is not regulated by law but can be used freely, for example by redeeming a life insurance policy.
This option increases financing capacity, but comes at a cost: each withdrawal reduces future pension benefits (retirement, disability, death) and entails immediate taxation of the withdrawn capital, at a preferential but not negligible rate.
2. Pledging an existing property
If you or a relative already own a property, it can be used as a guarantee for the purchase of a new home. This involves pledging an existing property, either partially or entirely, in order to convince the bank to grant a mortgage without requiring cash equity.
This setup is based on the net residual value of the property used as collateral: the lower the remaining mortgage, the higher the pledgeable value. For example, if a property worth CHF 800,000 has only CHF 300,000 left on the mortgage, the difference (CHF 500,000) can be used as coverage to secure a second loan.
This strategy is particularly well suited to families (parents wishing to help their children) or to investors who already own a property. However, it requires a rigorous analysis of the overall financial situation, as it increases exposure to risk in the event of a fall in property value or repayment difficulties.
3. Inheritance advance
An advance on inheritance allows a parent to transfer part of their future estate to a child during their lifetime, in order to help finance the purchase of real estate. This amount can be used to cover all or part of the equity required by the bank. The operation is often considered an early gift and should ideally be formalized through a notarized deed to prevent any future disputes among heirs.
It's an advantageous solution from a tax and inheritance point of view, facilitating access to property while optimizing the transfer of assets. However, it is essential to inform the other heirs, as the advance on inheritance will in principle be included in the estate, unless otherwise stipulated. Clear, transparent planning is therefore essential.
4. Third-party loans
When a buyer does not have the required equity, a loan granted by a third party (often a family member or close friend) can be a temporary alternative to complete the down payment. Unlike a gift or an advance on inheritance, this involves a repayable amount, usually interest-free or offered under favorable terms. This solution can help finalize the financing, provided the third-party lender has sufficient financial capacity and is willing to accept the associated risks.
5. Cooperative bond
The surety is a solution that allows a guarantee cooperative (recognized by the Confederation) to act as guarantor with the bank on behalf of a borrower. This means that if the borrower fails to repay the loan, the cooperative agrees to cover part of the risk, up to a maximum of CHF 1,000,000.–. This mechanism is primarily used by SMEs, particularly to help them obtain financing when starting a business, making an investment, or handling a succession.
In the context of homeownership, such a structure can, in some cases, intervene to guarantee part of the mortgage loan, when the buyer does not have sufficient equity but demonstrates a sound financial situation. The application process involves several steps (form, interview, solvency analysis), and the surety thereby facilitates the granting of credit by the bank by reducing the perceived risk.
What to look out for
Before embarking on a property purchase without equity, it's essential to carefully assess your long-term financial capacity. A mortgage burden that is too high, or an unexpected drop in income, can quickly jeopardize the household's financial equilibrium. What's more, some solutions, such as withdrawing from pension provision or relying on third parties, involve a reduction in social protection or obligations to family and friends.
It is therefore strongly recommended to seek the support of an independent financial advisor, in order to measure risks, compare options and build a solid, sustainable project.
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