What are the financing criteria for purchasing a second home?
The Covid-19 health crisis significantly increased interest in second homes. Whether for a rural retreat, a mountain chalet, or even a property abroad, owning a second home now represents an achievable dream for many Swiss residents. However, financing conditions differ considerably from those for a primary residence.
Down Payment: A Reinforced Requirement
33% minimum versus 20% for a primary residence
The most restrictive criterion concerns down payment. Unlike a primary residence which requires 20% down payment, purchasing a second home generally requires 33% of the property value, plus purchase costs.
| Type of residence | Maximum financing | Minimum down payment |
|---|---|---|
| Primary residence | 80% | 20% + purchase costs |
| Second home | 66% | 33% + purchase costs |
Optimization via your primary residence
If you already own a primary residence, you could increase your existing mortgage to free up the necessary liquidity. This option depends on:
- The amount already amortized on your primary loan
- Any capital gain on your property
- Your overall debt capacity
This refinancing strategy can enable you to release significant liquidity to finance your second home. Discover how to optimize your real estate refinancing to release liquidity.
Some institutions sometimes offer more favorable advance rates (up to 75% or even 80%) depending on the borrower's profile.
Debt-to-Income Ratio: A Specific Calculation
The 33% rule adapted
For a second home, the debt-to-income ratio calculation follows a particular logic. The financial institution applies a theoretical charges calculation for the second home, which is added to the charges of your primary residence.
If you are a renter: Debt-to-Income Ratio = (Rent + Theoretical charges second home) / Net income
If you are a homeowner: Debt-to-Income Ratio = (Theoretical charges primary residence + Theoretical charges second home) / Net income
Rental income: beware of restrictions
Potential rental income from your second home is only taken into account if it's a continuous annual rental. If you plan to use the property partially and rent it the rest of the time, this income cannot be included in the financing calculation.
Amortization: Different Rules
Direct amortization mandatory
Unlike a primary residence where you can use your pillar 3a, amortization of a second home is generally done directly. The debt must be gradually reduced to 50% of the property value.
Alternative: indirect amortization via pillar 3b
Some institutions accept indirect amortization via voluntary pension provision (pillar 3b). While less fiscally advantageous (except for Geneva and Fribourg residents), this option offers benefits in terms of family protection.
Location: A Determining Criterion
In Switzerland: mountain priority
The majority of financed second homes are located in mountain regions. Renowned resorts and established tourist destinations generally benefit from more favorable financing conditions.
Abroad: possible but complex financing
Financing a second home abroad remains possible but with additional constraints:
- Reduced number of institutions offering this service
- Specific rules depending on location
- Often higher minimum amounts
Strategic destinations like France (Megève, Saint-Tropez, certain Parisian neighborhoods) generally pose fewer problems thanks to their attractiveness and ease of resale.
Taxation: Intercantonal Distribution
Taxation in the canton of location
Your second home will be taxed in the canton where it's located. However, to avoid double taxation, an intercantonal distribution applies:
- Rental value, interest, maintenance costs paid in the canton of the property
- Impact on the tax rate in your canton of tax residence
Purchase Costs: Variable by Canton
Purchase costs remain similar to those of a primary residence and include:
| Type of cost | Description |
|---|---|
| Transfer taxes | Cantonal tax on real estate transactions |
| Land Registry fees | Official registration fees |
| Notary fees | Authentication compensation |
| Establishment of lien | Mortgage deed registration fees |
| Administrative fees | Various file fees |
Example: In Valais, a popular region for second homes, purchase costs are generally lower than those in the Canton of Vaud or Geneva.
Optimization Strategy
Recommended global approach
Before considering purchasing a second home, it's wise to re-optimize the financing of your primary residence. This approach can allow you to:
- Obtain more favorable conditions
- Increase your acquisition capacity
- Benefit from a higher advance rate
Advantages of expert guidance
Specialized advice can help you:
- Identify the institutions best suited to your profile
- Negotiate preferential conditions
- Optimally structure your overall financing
Conclusion
Acquiring a second home requires greater financial preparation than a primary residence, with increased down payment and specific debt criteria. However, with an adapted strategy and expert guidance, this project remains accessible for many buyers wishing to realize their dream of escape.
The key to success lies in the overall optimization of your financial situation and choosing the right financial partner according to your profile and objectives.
Are you considering purchasing a second home? Find an expert to finance your second home at neo-mortgage.ch