If you a pensioner with a foreign passport, what are your chances for a mortgage in Switzerland? And what happens if you already own a property but need to renew your mortgage after retirement?
There are two issues at play here: home ownership for retired people in general, and for foreign nationals specifically.
But first, let’s look at what rights foreign retirees have in Switzerland.
The most pressing question in this regard (even before worrying about mortgages) is: can you retain your residency permit once you stop working?
The answer depends on whether you have the financial means to continue living here without a regular salary. This criterium is meant to ensure that you will not seek social assistance.
If you have worked in Switzerland for many years, and receive your pension here, you should — at least in theory — be able to support yourself.
With that point resolved, there is also a matter of permits.
C permit trumps all
If, at the time of your retirement, you hold a C permit, you have the right to stay in Switzerland for as long as you want, or indefinitely, and not be subject to any time restrictions or conditions.
As for B permits, their validity ranges from one to five years, depending on whether you come from an EU /EFTA country or a third state.
If you are a five-year B permit holder and if you already know that you want to remain in Switzerland after retirement, look into your eligibility for a C permit and if you can get it before you stop working.
Holders of short-term permits like L are the least likely to be allowed to remain in Switzerland after retirement.
READ ALSO: Will my Swiss residency permit be valid after I retire?
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What about post-retirement mortgage?
In terms of mortgages (and other loans), foreign and Swiss pensioners are pretty much on equal footing. This means requirements are the same for everyone.
According to the Moneyland consumer platform, banks have strict mortgage-lending criteria.
“The rule of thumb here, sometimes called the golden rule of home finance, is this: mortgage rates plus additional charges shouldn’t amount to more than one-third of the borrowers income.”
The income of a Swiss pensioner, including their state pension (AHV / AVS) and retirement fund payments is, on average, at least a third lower than their pre-retirement earnings.
“For this reason, a fair amount of pensioners aren’t able to meet the affordability requirements explained in the formula above,” Moneyland said.” If a property’s value goes up, the additional charges may exceed 1 percent, making the criteria even more difficult to fullfil.
But if your assets are sufficient to meet the mortgage requirement, then the bank will likely not refuse it.
However, as a retiree, you may not be granted a long-term mortgage, but rather a short-term one.
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Can a bank refuse to renew your mortgage?
All property owners, regardless of their nationality, have an obligation to continue paying the interest on their mortgage.
If your financial situation no longer allows you to do that, banks will not only not extend your mortgage, but also demand that you sell your home.
“Swiss banks aren’t normally bendable where affordability requirements are concerned,” Moneyland pointed out.
In fact, they are further upping the criteria of their mortgage affordability checks, “and this move has hit pensioners especially hard.”
“In the worst case, elderly borrowers who no longer meet affordability requirements may be forced to sell their home to appease the bank.”
